Archive for the ‘China’ Category

Bamboo capitalism (China´s economy)

março 11, 2011

Matéria de capa da nova revista The Economist!

China’s economy

Bamboo capitalism

China’s success owes more to its entrepreneurs than its bureaucrats. Time to bring them out of the shadows

Mar 10th 2011 | from the print edition

FEW would deny that China has been the economic superstar of recent years. Thanks to its relentless double-digit annual growth, it has become the world’s second-largest economy and in many ways the most dynamic. Less obvious is quite what the secret of this success has been. It is often vaguely attributed to “capitalism with Chinese characteristics”–typically taken to mean that bureaucrats with heavy, visible hands have worked much of the magic. That, naturally, is a view that China’s government is happy to encourage.

But is it true? Of course, the state’s activity has been vast and important. It has been effective in eradicating physical and technological obstacles: physical, through the construction of roads, power plants and bridges; technical, by facilitating (through means fair and foul) the transfer of foreign intellectual property. Yet China’s vigour owes much to what has been happening from the bottom up as well as from the top down. Just as Germany has its mighty Mittelstand, the backbone of its economy, so China has a multitude of vigorous, (very) private entrepreneurs: a fast-growing thicket of bamboo capitalism.

These entrepreneurs often operate outside not only the powerful state-controlled companies, but outside the country’s laws. As a result, their significance cannot be well tracked by the state-generated statistics that serve as a flawed window into China’s economy. But as our briefing shows, they are an astonishing force.

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The Mittel Kingdom

First, there is the scale of their activities. Three decades ago, pretty much all business in China was controlled by one level of the state or another. Now one estimate—and it can only be a stab—puts the share of GDP produced by enterprises that are not majority-owned by the state at 70%. Zheng Yumin, the Communist Party secretary for the commerce department of Zhejiang province, told a conference last year that more than 90% of China’s 43m companies were private. The heartland for entrepreneurial clusters is in regions, like Zhejiang, that have been relatively ignored by Beijing’s bureaucrats, but such businesses have now spread far and wide across the country.

Second, there is their dynamism. Qiao Liu and Alan Siu of the University of Hong Kong calculate that the average return on equity of unlisted private firms is fully ten percentage points higher than the modest 4% achieved by wholly or partly state-owned enterprises. The number of registered private businesses grew at an average of 30% a year in 2000-09. Factories that spring up alongside new roads and railways operate round-the-clock to make whatever nuts and bolts are needed anywhere in the world. The people behind these businesses endlessly adjust what and how they produce in response to extraordinary (often local) competition and fluctuations in demand. Provincial politicians, whose career prospects are tied to growth, often let these outfits operate free not only of direct state management but also from many of the laws tied to land ownership, labour relations, taxation and licensing. Bamboo capitalism lives in a laissez-faire bubble.

But this points to a third, more worrying, characteristic of such businesses: their vulnerability. Chinese regulation of its private sector is often referred to as “one eye open, one eye shut”. It is a wonderfully flexible system, but without a consistent rule of law, companies are prey to the predilections of bureaucrats. A crackdown could come at any time. It is also hard for them to mature into more permanent structures.

Cultivate it, don’t cut it

All this has big implications for China itself and for the wider world. The legal limbo creates ample scope for abuse: limited regard for labour laws, for example, encourages exploitation of workers. Rampant free enterprise also lives uncomfortably alongside the country’s official ideology. So far, China has managed this rather well. But over time, the contradictions between anarchic opportunism and state direction, both vital to China’s rise, will surely result in greater friction. Party conservatives will be tempted to hack away at bamboo capitalism.

It would be much better if they tried instead to provide the entrepreneurs with a proper legal framework. Many entrepreneurs understandably fear such scrutiny: they hate standing out, lest their operations become the focus of an investigation. But without a solid legal basis (including intellectual-property laws), it is very hard to create great enterprises and brands.

The legal uncertainty pushes capital-raising into the shadows, too. The result is a fantastically supple system of financing, but a very costly one. Collateral is suspect and the state-controlled financial system does not reward loan officers for assuming the risks that come with non-state-controlled companies. Instead, money often comes from unofficial sources, at great cost. The so-called Wenzhou rate (after the most famous city for this sort of finance) is said to begin at 18% and can even exceed 200%. A loan rarely extends beyond two years. Outsiders often marvel at the long-term planning tied to China’s economy, but many of its most dynamic manufacturers are limited to sowing and reaping within an agricultural season.

So bamboo capitalism will have to change. But it is changing China. Competition from private companies has driven up wages and benefits more than any new law—helping to create the consumers China (and its firms) need. And behind numerous new businesses created on a shoestring are former factory employees who have seen the rewards that come from running an assembly line rather than merely working on one. In all these respects the private sector plays a vital role in raising living standards—and moving the Chinese economy towards consumption at home rather than just exports abroad.

The West should be grateful for that. And it should also celebrate bamboo capitalism more broadly. Too many people—not just third-world dictators but Western business tycoons—have fallen for the Beijing consensus, the idea that state-directed capitalism and tight political control are the elixir of growth. In fact China has surged forward mainly where the state has stood back. “Capitalism with Chinese characteristics” works because of the capitalism, not the characteristics.

Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity

fevereiro 28, 2011

Muito se tem falado, e escrito, sobre o impacto da ascenção da China à categoria de potência econômica.  Mas pouco se tem analisado sobre o verdeiro impacto da China em questões relacionadas com inovação, tecnologias de informação e produtividade.

Eis que este hiato começa a ser preenchido.  Em mais um excelente artigo do National Bureau of Economic Research- NBER, dos EUA, tais questões são enfrentadas de forma competente!

Abaixo vai o resumo deste novo artigo!

Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity

Nicholas Bloom, Mirko Draca, John Van Reenen

NBER Working Paper No. 16717
Issued in January 2011
NBER Program(s):   EFG IO ITI LS PR

We examine the impact of Chinese import competition on patenting, IT, R&D and TFP using a panel of up to half a million firms over 1996-2007 across twelve European countries. We correct for endogeneity using the removal of product-specific quotas following China’s entry into the World Trade Organization. Chinese import competition had two effects: first, it led to increases in R&D, patenting, IT and TFP within firms; and second it reallocated employment between firms towards more innovative and technologically advanced firms. These within and between effects were about equal in magnitude, and appear to account for around 15% of European technology upgrading between 2000-2007. Rising Chinese import competition also led to falls in employment, profits, prices and the skill share. By contrast, import competition from developed countries had no effect on innovation. We develop a simple “trapped factor” model of innovation that is consistent with these empirical findings.

This paper is available as PDF (346 K) or via email.

Why Are Saving Rates so High in China?

fevereiro 15, 2011

O debate recente acerca do crescimento econômico brasileiro (crescimento traduzido pela sua mediocridade desde os anos 80, ou pela sua insustentabilidade) quase sempre esteve associado à baixa capacidade de poupar dos brasileiros; ou seja, baixa capacidade de poupar, baixa capacidade de investir, e consequente baixo crescimento econômico.

Um contraponto a isto tem sido o modelo chinês, cujas altas taxas de crescimento são sempre associadas às suas altas taxas de poupança.  Frequentemente nós economistas dizemos que os chineses poupam muito porque eles não têm a rede social de proteção que nós construimos ao longo dos últimos 20 e poucos anos.

Mas agora os números e as explicações para a pujança do crescimento econômico chinês começam a ficar mais claros. E é o que indica um recente paper do National Bureau of Economic Research- NBER dos EUA, cujo resumo segue abaixo.

Why Are Saving Rates so High in China?

Dennis Tao Yang, Junsen Zhang, Shaojie Zhou

NBER Working Paper No. 16771
Issued in February 2011
NBER Program(s):   EFG

In this paper, we define “The Chinese Saving Puzzle” as the persistently high national saving rate at 34–53 percent of gross domestic product (GDP) in the past three decades and a surge in the saving rate by 11 percentage points from 2000–2008. Using data from the Flow of Funds Accounts (FFA) and Urban Household Surveys (UHS) supplemented by the findings from existing studies, we analyze the sources and causes of China’s high and rising saving rates in the government, corporate, and household sectors. Although the causes of China’s high saving are complex, we suggest that the evolving economic, demographic, and policy trends in the internal and external environments of the Chinese economy will likely lead to a decline in national saving in the foreseeable future.

This paper is available as PDF (212 K) or via email.

O efeito China sobre as importações brasileiras

dezembro 26, 2010

A China tem sido, e será ainda muito mais nesta próxima década, um país que não pode mais ser ignorado na nossa economia.  Além de ter se tornado a segunda maior potência econômica do planeta, está paulatinamente ficando mais relevante para a economia brasileira.

É o que corrobora interessante artigo publicado pelo BNDES, intitulado “O efeito China sobre as importações brasileiras“, produzido pelos economistas Fernando Puga e Marcelo Nascimento, e que pode ser baixado aqui!

Uma das revelações do artigo é que entre 2005 e 2010 se notou pouca modificação nos percentuais de evolução da participação da China nas importações brasileiras de produtos intensivos em recursos naturais (um ganho de apenas 0,7 pontos percentuais).  Em contraste, a participação chinesa em produtos intensivos em trabalho e intensivos em conhecimento aumentou em 14,8 pontos percentuais e 11,1 pontos percentuais, respectivamente.

Vale a pena a leitura!

The Contribution of Human Capital to China’s Economic Growth

dezembro 19, 2010

Interessante paper do National Bureau of Economic Research- NBER dos EUA sobre o papel do capital humano no crescimento econômico da China!

The Contribution of Human Capital to China’s Economic Growth

John Whalley, Xiliang Zhao

NBER Working Paper No. 16592
Issued in December 2010
NBER Program(s):   EFG


This paper develops a human capital measure in the sense of Schultz (1960) and then reevaluates the contribution of human capital to China’s economic growth. The results indicate that human capital plays a much more important role in China’s economic growth than available literature suggests, 38.1% of economic growth over 1978-2008, and even higher for 1999-2008. In addition, because human capital formation accelerated following the major educational expansion increases after 1999 (college enrollment in China increased nearly fivefold between 1997 and 2007) while growth rates of GDP are little changed over the period after 1999, total factor productivity increases fall if human capital is used in growth accounting as we suggest. TFP, by our calculations, contributes 16.92% of growth between 1978 and 2008, but this contribution is -7.03% between 1999 and 2008. Negative TFP growth along with the high contribution of physical and human capital to economic growth seem to suggest that there have been decreased in the efficiency of inputs usage in China or worsened misallocation of physical and human capital in recent years. These results underscore the importance of efficient use of human capital, as well as the volume of human capital creation, in China’s growth strategy.

This paper is available as PDF (282 K) or via email

iPhone Added $2Billion to Trade Deficit w/China

dezembro 18, 2010

Post do blog do Prof. Mark Perry ( na quarta-feira 15/12/2010!


iPhone Added $2Billion to Trade Deficit w/China


Turn over your iPhone and you’ll see that it’s “assembled in China.” But that doesn’t mean that most of the profits or revenue go there. In fact, only about $6.54 (a little more than than 1%) of the full $600 retail price of an iPhone goes to China and more than 60% goes directly to Apple and other American companies (see chart above), according to a “teardown report” by iSuppli that was featured in a July New York Times article. It also doesn’t mean that your purchase of an iPhone contributed very much to the U.S. trade deficit, even though that’s what the government trade statistics tell us.

A new reasearch paper calculates that because of the way trade statistics are calculated – the full value of an iPhone is considered an export to the U.S. from China by both countries, even though only about 1% of the value was created during the final assembly process in China –  just the iPhone alone added almost $2 billion to America’s trade deficit with China in 2009. The authors find that if a “value-added approach” was used to calculate trade statistics, the iPhone would have instead generated a $48 million trade surplus for the U.S. in 2009, instead of the $1.9 billion trade deficit reported using the conventional methodology.

See WSJ article here, which points out some political implications:
“The new research adds to a growing technical debate about traditional trade statistics that could have big real-world consequences. Conventional trade figures are the basis for political battles waging in Washington and Brussels over what to do about China’s currency policies and its allegedly unfair trading practices.  There’s a growing belief that the practice of assuming every product shipped from one country is entirely produced by that country no longer reflects the complex reality of global commerce.
If trade statistics were adjusted to reflect the actual value contributed to a product by different countries, the size of the U.S. trade deficit with China—$226.88 billion, according to U.S. figures—would be cut in half. That means that political tensions over trade deficits are probably larger than they should be.”


Inflation in China

novembro 13, 2010

Estamos iniciando uma nova categoria sobre a China.  E nada mais interessante do que noticiar sobre sua economia, e com um post que saiu no Financial Times do dia 11/11/2010, cujo original saiu aqui!


By Geoff Dyer in Beijing

Published: November 11 2010 04:11 | Last updated: November 11 2010 14:16

China inflation surges to 25-month high

Chinese inflation jumped to its highest level in just over two years in October, prompting new fears that the economy could be overheating as a result of the government’s huge stimulus measures.

Consumer price inflation surged to 4.4 per cent in October from 3.6 per cent the month before, well above the government’s target of 3 per cent and increasing the pressure on the authorities to introduce new tightening measures.

The country’s banks are also on track to exceed this year’s quota for bank lending after new loans reached Rmb587.7bn ($88.7bn, £55bn, €64.7bn) in October. Economists said that to meet the full-year target of Rmb7,500bn, there would need to be a sharp contraction in new bank lending in the past two months of the year.Although inflation in China has been inching up for some months, the big jump in October surprised many economists and raises the chances of further interest rate rises this year to follow the increase last month and the increase in bank reserve requirements announced on Wednesday.

Beijing is also under pressure from other governments to accelerate the appreciation of its currency – a topic that will be prominent at Friday’s G20 summit – which could help damp inflationary pressures. At the close of Asian trading on Thursday, the Chinese currency had gained almost 1 per cent against the dollar over three days.

Li Wei and Stephen Green at Standard Chartered in Shanghai said that on a seasonally adjusted basis, consumer price inflation increased at an annualised rate of 12.1 per cent in October, up from 5.2 per cent the month before. “This is worrying as inflation is now heading towards its level in mid-2007, which was a time of overheating,” they said in a note.

Earlier this week, Zhang Ping, head of the National Development and Reform Commission, the main economic planning body, acknowledged inflation would exceed the 3 per cent target this year. He blamed the weaker US dollar, speculation in commodities’ markets and loose monetary conditions.

Several Chinese officials have warned in recent weeks that the new round of quantitative easing in the US will lead to hot money inflows into developing economies, and the Chinese foreign exchange regulator has taken steps this week to reduce capital inflows in the financial system.

However, many economists believe that it is relaxed monetary policy in China which is adding to the domestic inflationary pressures, rather than capital inflows from overseas. “There is no trick to keeping growth afloat on a sea of credit, the question is what happens when the lending taps are turned off,” said Tom Orlik, an economist at Stone & McCarthy in Beijing.

Jun Ma at Deutsche Bank predicts that the authorities will relabel monetary policy from “relaxed” to “prudent” at an economic policymakers conference in December, which would signal a reduction in the planned growth of new loans for next year. Some economists predict the government might introduce some form of price controls if the inflation rate remains at this level.

“China needs to do more to keep this year’s inflation under the target ceiling,” Sheng Laiyun, spokesman for the statistics bureau, said on Thursday.

Other figures released on Thursday suggested the economy continues to expand at a strong rate. Industrial production increased 13.1 per cent in October compared to the year before, while retail sales expanded by 18.6 per cent, year-on-year.

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