This paper seeks to examine the determinants of the profitability of the Chinese banking sector during the post-reform period of 2000–2005. The empirical findings from this study suggest that all the determinants variables have statistically significant impact on China banks profitability. However, the impacts are not uniform across bank types. We find that liquidity, credit risk, and capitalization have positive impacts on the state owned commercial banks (SOCBs) profitability, while the impact of cost is negative. Similar to their SOCB counterparts, we find that joint stock commercial banks (JSCB) with higher credit risk tend to be more profitable, while higher cost results in a lower JSCB profitability levels. During the period under study, the empirical findings suggest that size and cost results in a lower city commercial banks (CITY) profitability, while the more diversified and relatively better capitalized CITY tend to exhibit higher profitability levels. The impact of economic growth is positive, while growth in money supply is negatively related to the SOCB and CITY profitability levels.

Based on resource curse hypothesis, this paper carries out an econometric analysis on the relationship and its transmission mechanism between energy exploitation and economic growth with cross-province panel data over 1991–2006. Results reveal that there is the significantly negative correlation between energy exploitation and economic growth, which indicates since the 1990s, the resource curse effect from energy exploitation has appeared evidently; though, before the implementation of the Western development strategy, energy exploitation acted negatively on opening degree, S&T innovation and human capital input, the effect was yet uncreated. However, after the implementation of the strategy, the effect emerged evidently as a result of the enhanced negative effect of energy exploitation on S&T innovation and human capital input. Moreover, further tests indicate that energy exploitation impeded economic growth mainly through three indirect transmission channels: The crowding-out effect towards human capital input and S&T innovation, and the weakening of institution aroused by rent-seeking and corruption. And among them, human capital input is the strongest transmission factor.

Many theory and empirical literature conclude that house price can reflect economic fundamentals in the long-term. However, by using China’s panel data of 35 main cities stretching from 1998 to 2007, we find that there is no stable relationship between house price and economic fundamentals. House price has deviated upward from the economic fundamentals since government started macro-control of the real estate market. We consider that the mechanism between the house price and economic fundamentals is distorted by China’s real estate policy, especially its land policy. Meanwhile the policy itself is an important factor in explaining the changes of China’s house price. Then we estimate the dynamic panel data model on house price and the variables which are controlled by real estate policy. The result shows: land supply has negative effects on house price; financial mortgages for real estate have positive effects on house price; and the area of housing sold and the area of vacant housing, which reflects the supply and demand of the housing market, has negative effects on house price. We also find some differences in house price influence factor between eastern and mid-western cities. Finally, we propose policy suggestions according to the empirical results.

This paper develops an empirical model to test the spatial spillover effects of transport infrastructure on economic growth. It uses spatial econometric techniques and provincial panel data of China from 1993 to 2004 to analyze the contribution of transport infrastructure to the economic growth of local province and its spatial spillover effects on the economic growth of other provinces. The main findings include: (1) Transport infrastructure and economic growth of China show an evident pattern of spatial clustering. They largely congregate in developed eastern coastal regions, forming a gradient gradually diminishing from east to west. (2) Output elasticity of local transport infrastructure is 0.106, between the values calculated by early researchers with time series data and panel data. (3) Spatial output spillovers from transport infrastructure are largely positive, but evidences of negative spatial spillovers are also found with population density spatial weights matrix model.

This paper presents an empirical assessment of the market structure and the competitive conditions of the Chinese banking sector. We applied the Panzar-Rosse H-statistic on the data collected from a panel including 16 most significant Chinese banks for the period 2004–2007. Equilibrium tests and the competitive conditions tests were applied on the data. From the pooled regression in the whole period, we found that the banking sector in China for 2004–2007 was monopolistically competitive. We also show that the Chinese banks were not able to achieve high records of profitability in monopolistically competitive markets.

This paper reviews the current literature on Chinese agricultural growth in the past three decades, and finds that fertilizers, price reforms, human capital growth, and demographic changes are the main factors for the continuous growth of agricultural outputs and farmer income. The costs for the growth include severe environmental pollutions and the incoming population aging which should be cured in order to achieve a sustainable growth.

This paper offers a novel explanation for the lower urbanization rate and great urban-rural inequality in China. Our study reveals that, heavy-industry-oriented development strategy will result in lower urbanization rate and higher urban-rural inequality. The greater the degree of heavy-industryoriented development strategy is, the lower the urbanization rate is, and the higher the urban-rural inequality is. From a dynamic perspective, heavy-industryoriented development strategy reduces the capital accumulation rate, which results in a slower progress of urbanization and a highly persistent urban-rural inequality. The higher the degree of heavy-industry-oriented development strategy, the slower the progress of urbanization, and the longer the urban-rural inequality will last. This mechanism can potentially explain the lower urbanization rate and higher urban-rural inequality in China under a unified framework.

To analyze China industrial sustainable development featured with high energy consumption and high CO2 emission, this paper constructs the input and output panel data of China’s 38 sub-industries, estimates their productivity and carries out the green growth accounting based on translog production function. This paper concludes that, as a whole, China industry has achieved the transformation from extensive to intensive growth, with the productivity to be the first driving force, that is necessary to sustainable development in the long run. In addition to technical progress, energy and capital have also been driving the industrial growth during the sample period, while labor and emission made less even negative contribution to it. Some heavy industries, however, are still characterized by extensive growth and must improve their energy-save and emission-abate technology to favor the sustainable development of overall Chinese industry.

By utilizing the China Health and Nutrition Survey (CHNS) data, this paper examines the extent of deviations in terms of horizontal equity in the field of China’s health and medical community, i.e., that those in equal demand ought to be treated equally, and computes the contribution of income in health inequality and utilization inequality of health care. The main conclusions are: There is pro-rich inequality in health and utilization of health care; income contribution to inequality of health care utilization accounts for 0.13–0.2; insurance also enlarges the inequality of health care utilization; health inequality in rural area is larger than that of in urban area; and both rural and urban health inequality are increasing. From 1991 to 2006, income changes in urban districts and rural area account for 7.08% and 13.38% respectively of raising inequality of rural and urban health.

Based on panel data at the provincial level in China, this paper found that direct effects foreign direct investment (FDI) had on economic growth were of insignificance. However, through improving technical efficiency and crowding  in domestic investment, FDI produced positive effects on China s economy. The state sector still played a major part in the total fixed investment, therefore, direct effects on growth were significant. Although private sector was increasingly important for the whole economy, it had no direct influences on economic growth. Meanwhile, neither the state sector nor private sector made contribution to the improvement on technical efficiency.

This paper tests the external spillover effects of the transportation on China’s economic growth from the theoretical and the empirical perspectives. Based on a logarithm production model, this study first proves the existence of the positive externality in the transportation. After that, the authors collect the data of the 28 provinces in China from 1985 to 2006, and use a relatively advanced spatial econometric method to test the positive externality. After constructing a spatial econometric model, the authors use the Maximum Likelihood (ML) method to estimate this model. According to the theoretical model and the empirical results, this article reaches the following conclusion: (1) The positive externalities in the transportation do exist; (2) From 1985 to 2006, the transportation contributed 24.8 billion yuan to China’s GDP every year: in this 24.8 billion yuan, 19.6 billion comes from the direct contribution and the rest 5.2 billion comes from the external spillover effects; (3) The summation of the direct contribution and the external spillover effects to the economic growth is on average 13.8% every year.

This paper analyses total factor productivity (TFP) of China’s manufacturing sector and its decomposed indexes, i.e., technological progress and technological efficiency by employing Malmquist productivity index based on the Data Envelopment Analysis (DEA) approach. Using panel data of domestic manufacturing sector in China from 2000 to 2005, we estimate the influences of horizontal and vertical linkages on TFP and its decomposition indexes by controlling R&D and exports indexes of domestic manufacturing sector. The empirical results show that R&D and exports have a positive effect on TFP and that FDI inflows lead to positive spillovers significantly in general mainly through technological progress resulting from backward linkages; however, forward linkages have no technology spillover effect while horizontal linkages promote TFP through technological efficiency which has quite different influencing modes compared to that of backward and forward linkages. The grouping regression results also show that FDI technology spillovers have different conductive mechanisms under different technological levels, industry concentrations and export dependency indexes.

The Confucian school emphasizes family value, moral persuasions, and personal relations. Under Confucianism, there is a free-rider issue in the provision of efforts. Since national officials are chosen through personal relations, they may not be the most capable. The Legalist school emphasizes the usage of incentives and formal institutions. Under the Legalism, the ruler provides strong incentives to local officials which may lead to side effects because some activities are noncontractible. The cold-blood image of the Legalism may alien citizens. By exploiting the paternalistic relationship between the ruler and the ruled under Confucianism and the strength of institution-building under the Legalism, the ruler may benefit from a combination of Confucianism approach and the Legalism approach as the national strategy of governance. As each strategy has its pros and cons, which strategy of is optimal depends on factors such as the minimum enforceable level of public service and the level of institution building costs.

Transforming a traditional agricultural economy into a modern economy is one of the main themes in economic development. Through theoretical and empirical analysis, this paper finds out that the key to transformation is to raise the economic value of people, to improve human capital investment and to match the stocks of physical and human capital. China s rural economy is on the edge of economic take-off, and different zones may pursue different paths for transformation. The source of rural poverty is not the scarcity of income or consumption, but the deficiency of education, social security, medical care and economic opportunity, which we define as capability poverty .

We examine the performance-flow relationship(PFR) in Chinese open-end fund market and find that PFR is negative and concave. The shape of PFR indicates that investors’ choice does not pose an incentive mechanism on fund managers: The better an open-end fund performs, the higher the net redemption rate is. We argue that return volatility, dividend and fund size are also important factors on investors’ choice making. Such results are valuable for fund management to reduce this redemption puzzle.

With panel data for 28 Chinese provinces (autonomous regions, municipalities) during 1985–2002, this paper assesses the effect of banking structure on economic growth. Banking structure is defined as the relative importance of banks of different size in the banking sector. The market share of small banking institutions is taken as a proxy to measure the banking structure. In dealing with the potential endogeneity problem, this paper constructs an instrumental variable for banking structure with the information on the commercialization reform of state-owned banks initiated in 1994. The estimation results from a two-way fixed-effect model show that increases in the market share of small banking institutions enhance economic growth in contemporary China.

ZHANG Weidong

WU Kangping

The purpose of this paper is to report estimates of capital input index classified by industries in China from 1981 to 2000. We estimate capital stock based on the perpetual inventory method, and then estimate the flow of capital service and capital service price consistently with the capital compensation in input-output table. In our study, we discuss various assumptions and adjustments made on the data and estimation implementation.

In this paper, we develop a model of institutional change of land property right in China, which include the influences of lobbying and the political power division in 1978. The model illustrates how extra gains are produced under different institutions and how lobbying and political power division can affect the change. It is clear that the institutional innovation has something to do with the leaders’ legal income, the cost of institutional change and the conversion rate. Given the pattern of leader’s power division, it is the best way for the people in rural areas to change their institutional framework, and it is efficient to mix local and central governmental policies. And lobbying and leading power division can affect the direction and the course of institutional changes that would lead different result among different areas.

Departing from the traditional profit-maximization assumption underlying the theory of the multinational enterprises (MNEs), this paper proposes a model of the revenue-maximizing MNE subject to the profit constraint. The nonlinear programming techniques are used for the equilibrium analysis of the MNE’s decision-making. A set of optimal conditions is derived regarding the quantity of output, volume of intra-firm trade, allocation of multinational production, as well as transfer prices in both exogenous and endogenous cases. Under the context, a comparison of the behavioral differences is made between the revenue-maximizing MNE and the profit-maximizing MNE.

Since the introduction of the household responsibility system, China’s agricultural economy has been growing with the enlargement of regional labor productivity disparity. Based on the traditional decomposition technique for

Based on an analysis of some theories, this paper studies the relationships among rural household investments and their interaction with farmer income increase empirically by the data of 1983-2005. The findings are: (1) Health investment makes against the growth of farmer, human capital investments for other types, besides, it can not satisfy the needs of farmer. (2) Although migration investment is useful to the growth of farmer income, education and health investment, its effects is time lagged. (3) Education investment has the biggest effects on the growth of farmer income; besides, it also reduces the cost of migration. However, this reduction is a bit small. Finally, some brief suggestions are put forward based on the analysis.

Using the micro data of Urban Household Survey made by the National Bureau of Statistics of China(NBS) in 2002, this paper studies quantitatively the distributional effects of Public Pension Reform in urban China, from intragenerational and intergenerational perspectives, by measuring lifetime net benefits that urban employees obtain under the public pension system in 1997 and the newest one announced in December 2005, respectively. The results indicate that the regressive income transfer existing before implementation of the reform is improved as a consequence of the 1997 reform. However, the Act of 2005 Reform generates the obvious inclination of the regressive income transfer among people who exceed 40 years old in 2002. On the other hand, from the viewpoint of intergenerational distribution, the intergenerational inequality resulted from 1997 reform is greater than that from 2005 reform. Moreover, all generations would receive higher lifetime net benefits under the Act of 2005 Reform, but it must be based on sustainable pension system and participants’ full pension contribution during their duration of employment.

This paper uses the ARFIMA-FIGARCH model to investigate the China’s monthly inflation rate from January 1983 to October 2005. It is found that both first moment and second moment of inflation have remarkable long memory, indicating the existence of long memory properties in both inflation level and inflation uncertainty. By the Granger-causality test on inflation rate and inflation uncertainty, it is shown that the inflation level affects the inflation uncertainty and so supports Friedman hypothesis. Therefore, as for policy maker, they should roundly concerns on long memory properties of inflation and inflation uncertainty, and their single-direction relationship between them.

Chinese excessive liquidity problems are more serious than other main countries. The upgrading industrial structure and the increasing opening degree lead to the excessive money demand and higher money demand elasticity. Bad credits weaken money supply effectiveness and lead to illusive increasing money. We set up the money market disequilibrium model under the condition of the excessive liquidity. The imbalance between money demand and money supply is the key of Chinese excessive liquidity problems.

The income velocity of money in China has been declining since the country s reform. By studying the money demand behavior in the agricultural and non-agricultural sectors, we found that the marginal propensity to money demand is much higher in the non-agricultural sector. This implies that as the share of the agricultural sector in national income declines, monetary expansion is expected to meet not only the needs of income growth, but also the rapid structural shifts in the sectoral composition of income. Hence, non-inflationary monetary expansion is possible as development proceeds. This provides a new perspective in understanding the decline in the income-velocity of money in China.

This paper empirically studies the relationship between the governance mechanisms and the market valuation of publicly listed firms in China. The authors construct measures for corporate governance mechanisms and measures of market valuation for all publicly listed firms on the two stock markets in China by using data from the firm s annual reports. They then investigate how the market-valuation variables are affected by the corporate governance variables while controlling for a number of factors commonly considered in market valuation analysis. A corporate governance index is also constructed to summarize the information contained in the corporate governance variables. The index is found to have statistically and economically significant effects on market valuation. The analysis indicates that investors pay a significant premium for well-governed firms in China, benefiting firms that improve their governance mechanisms.

There are a number of theoretical reasons why cities interact with each other. Such spatial interdependence has been largely ignored by the empirical literature with only a couple of recent papers accounting for such issues in their estimation. This paper takes spatial dependence panel data models in specifying and testing to analyze three metropolitan growth behaviors in China. We find that controlling for fixed-effects allows us to disentangle the effect of spatial dependence from that of spatial heterogeneity and that of omitted variables. The estimated relationships of traditional determinants of urbanization are robust to inclusion of terms to capture spatial interdependence, even though such interdependence is estimated to be significant. Additionally, the three metropolitan areas might be said to represent three distinct stages during the urbanization of China.