List of Boxes .................................................. xi
List of Case Studies ......................................... xiii
List of Figures ................................................ xv
List of Tables ............................................... xvii
Contents of the Companion Site ................................ xix
List of Abbreviations ......................................... xxi
Acknowledgments ............................................. xxiii
Map ........................................................... xxv
Introduction ................................................ xxvii
1 A Brief History of China ..................................... 1
1.1 The Origins of the Nation ............................... 1
1.1.1 Cradle of the Nation ............................. 2
1.1.2 Xia, Shang, and Zhou Dynasties ................... 2
1.2 The Rise and Fall of the Empire ......................... 2
1.2.1 Qin, Han, and Jin Dynasties ...................... 2
1.2.2 Sui, Tang, and Song Dynasties .................... 4
1.2.3 Yuan, Ming, and Qing Dynasties ................... 4
1.2.4 The Fall of the Empire ........................... 5
1.3 China in the New Millennium ............................. 6
1.3.1 Socialism in Transition .......................... 6
1.3.2 Capitalism, Chinese Style? ....................... 6
Case Study 1 ................................................. 7
References ................................................... 9
2 Spatial and Administrative Divisions ........................ 11
2.1 Administrative Divisions ............................... 12
2.1.1 Historical Evolution ............................ 12
2.1.2 China's Administrative Hierarchy ................ 12
2.1.3 Large Versus Small Administrations .............. 13
2.1.4 How Many Provinces Should There Be in China? .... 15
2.2 Great Regions .......................................... 15
2.2.1 Historical Evolution ............................ 15
2.2.2 Statistical and Economic Regions ................ 15
2.3 Geographical Belts ..................................... 17
2.3.1 Coastal and Inland Areas ........................ 17
2.3.2 Eastern, Central and Western Belts .............. 17
2.4 Southern and Northern Parts ............................ 18
2.4.1 Natural and Social Contexts ..................... 18
2.4.2 Criteria for the Bifurcation .................... 19
2.5 Ethno-Cultural Areas ................................... 19
2.5.1 Historical Evolution ............................ 19
2.5.2 Organization .................................... 20
2.6 Summary ................................................ 22
Case Study 2 ................................................ 22
References .................................................. 26
3 Human and Cultural Contexts ................................. 27
3.1 Population ............................................. 28
3.1.1 General Situation ............................... 28
3.1.2 Population Control .............................. 29
3.1.3 Problems ........................................ 29
3.2 Labor Force ............................................ 31
3.2.1 General Situation ............................... 31
3.2.2 Rural-To-Urban Migration ........................ 31
3.3 Education .............................................. 33
3.3.1 Historical Evolution ............................ 33
3.3.2 Progress and Problems ........................... 34
3.3.3 Institutional Constraints ....................... 36
3.4 Cultural Diversity ..................................... 37
3.4.1 Ethnicity ....................................... 37
3.4.2 Language ........................................ 40
3.4.3 Religion ........................................ 40
3.5 Summary ................................................ 43
Case Study 3 ................................................ 43
References .................................................. 46
4 Natural and Environmental Resources ......................... 47
4.1 Natural Resources ...................................... 48
4.1.1 Land and Agriculture ............................ 48
4.1.2 Mineral Resources ............................... 48
4.1.3 Water Availability .............................. 51
4.2 Energy Production ...................................... 52
4.2.1 Coal ............................................ 53
4.2.2 Petroleum and Natural Gas ....................... 54
4.2.3 Clean/Green Energy .............................. 54
4.3 Environmental Quality .................................. 55
4.3.1 Air ............................................. 56
4.3.2 Water ........................................... 57
4.3.3 Land ............................................ 57
4.3.4 Deforestation and Desertification ............... 58
4.4 Chinese Environmental Policy ........................... 59
4.4.1 About Sustainable Development ................... 59
4.4.2 China's Commitment to the Environment ........... 61
4.4.3 Unresolved Issues ............................... 62
4.5 Policy Implications .................................... 63
Case Study 4 ................................................ 63
References .................................................. 66
5 Political and Administrative Systems ........................ 67
5.1 Party Versus State ..................................... 68
5.1.1 What Does the Constitution Say? ................. 68
5.1.2 How the Communist Party Works ................... 68
5.1.3 CCPand 'Baiping' ................................ 70
5.2 Government and Administrative Systems .................. 70
5.2.1 Central Government .............................. 70
5.2.2 Provincial Administrations ...................... 72
5.2.3 Sub-Provincial and Prefectural
Administrations ................................. 74
5.2.4 County-Level Administrations .................... 75
5.2.5 Grassroots Administrations ...................... 75
5.3 Legal System ........................................... 76
5.3.1 Legislation with Chinese Characteristics ........ 76
5.3.2 Legalization Without Democracy .................. 77
5.4 (Dis)advantages of China's Political System ............ 79
5.4.1 Authoritarianism, Chinese Style ................. 79
5.4.2 Chinese Political Sustainability ................ 80
5.5 Further Implications ................................... 83
References .................................................. 83
6 Economic Systems in Transition .............................. 85
6.1 Economic Transition, Chinese Style ..................... 86
6.1.1 An Overview ..................................... 86
6.1.2 Plan-Market Mix ................................. 86
6.1.3 Socialist Market Economy ........................ 87
6.2 Getting Out of Plan .................................... 87
6.2.1 How the Planned Economy Worked .................. 87
6.2.2 Double-Track System ............................. 89
6.2.3 Regional Differences ............................ 89
6.3 Labor and Employment ................................... 90
6.3.1 Job Allocation During the Pre-Reform Era ........ 90
6.3.2 Employment During the Transition Era ............ 92
6.4 Production Ownership ................................... 93
6.4.1 Agriculture ..................................... 93
6.4.2 Industry ........................................ 94
6.5 Public Finance ......................................... 97
6.5.1 Central-Local Fiscal Relations (1980-93) ........ 98
6.5.2 Tax-Sharing System (1994-) ..................... 100
6.6 Banking System ........................................ 101
6.6.1 Chinese Banks in Transition .................... 101
6.6.2 Progress and Problems .......................... 102
6.7 Summary ................................................ 103
Annex ...................................................... 104
References ................................................. 104
7 Understanding Chinese Economic Reform ...................... 107
7.1 Radical Reform: the Successful Cases .................. 108
7.1.1 Agricultural Reform ............................ 108
7.1.2 Reform of Chinese Bureaucracy .................. 108
7.2 Radical Reform: the Unsuccessful Cases ................ 109
7.2.1 Price-Release Reform ........................... 109
7.2.2 The SOE Reform During the 1990s ................ 110
7.3 Gradual/Partial Reform: the Successful Cases .......... 110
7.3.1 Introduction of the Dual-Track System .......... 110
7.3.2 Decentralization of Authority .................. 111
7.3.3 Reform of Foreign Exchange System .............. 112
7.4 Gradual/Partial Reform: the Unsuccessful Cases ........ 112
7.4.1 The SOE Reform in the 1980s .................... 112
7.4.2 Decentralization of Authority in the 1980s ..... 112
7.4.3 Reform of China's Banking System ............... 113
7.5 Whither Chinese-Style Reform? ......................... 113
7.5.1 Political Economy of Reforms ................... 113
7.5.2 WTO and the Chinese Reform ..................... 115
7.6 Summary ............................................... 116
Annex ...................................................... 117
Case Study 5 ............................................... 119
References ................................................. 122
8 Economic Growth and Income (Re)distribution ................ 125
8.1 Macroeconomic Performance ............................. 126
8.1.1 How Large Is China's Economy? .................. 126
8.1.2 Is Chinese GDP (Under-) Over-Estimated? ........ 127
8.2 Understanding Economic Growth ......................... 127
8.2.1 Literature Review .............................. 127
8.2.2 Factors Contributing to Growth ................. 128
8.3 Income Distribution and Inequality .................... 129
8.3.1 How (Un)Equal is the Chinese Society? .......... 129
8.3.2 Income Inequality: Causes ...................... 130
8.3.3 Income Inequality: Consequences ................ 132
8.3.4 Poverty Alleviation ............................ 133
8.4 Income Redistribution and Social Security ............. 134
8.4.1 China's Existing Tax System .................... 134
8.4.2 Personal Income Tax ............................ 135
8.4.3 Social Security ................................ 136
8.5 Summary ............................................... 136
Annex ...................................................... 137
Case Study 6 ............................................... 138
References ................................................. 142
19 Multiregional Economic if Comparison ....................... 145
9.1 China's Statistical Systems ............................ 145
9.1.1 Material Product System ........................ 145
9.1.2 System of National Accounts .................... 146
9.1.3 Credibility of Chinese Statistics .............. 147
9.2 Macroeconomic Performance ............................. 148
9.2.1 Estimating China's Time-Series Data ............ 148
9.2.2 China's Interprovincial Differences ............ 149
9.3 Real Living Standards ................................. 151
9.3.1 General Situation .............................. 151
9.3.2 Rural-Urban Disparity .......................... 152
9.3.3 Spatial Differences in Purchasing Power ........ 154
9.4 Regional Economic Disparity ........................... 155
9.4.1 Literature Review .............................. 155
9.4.2 Regional Inequality Index ...................... 156
9.5 Summary ............................................... 157
Annex ...................................................... 158
Case Study 7 ............................................... 159
References ................................................. 160
10 Regional Diseconomies and Development Strategy ............. 163
10.1 Spatial Comparative Advantages ........................ 164
10.1.1 General Overview ............................... 164
10.1.2 Location Quotient .............................. 164
10.1.3 Empirical Evidence ............................. 165
10.2 Spatial Economic Separation ........................... 167
10.2.1 Geographical Barriers .......................... 167
10.2.2 Administrative Barriers ........................ 168
10.2.3 Ethno-Cultural Barriers ........................ 169
10.3 Spatial Diseconomies and China ........................ 170
10.3.1 China's Quest for Spatial Integration .......... 170
10.3.2 Multiregional Economic Cooperation ............. 170
10.3.3 Trans-Province Border Economic Cooperation ..... 171
10.4 Regional Development Strategies ....................... 173
10.4.1 Historical Review .............................. 173
10.4.2 Coastal Area Development Strategy .............. 173
10.4.3 Western Region Development Strategy ............ 174
10.4.4 Resurgence of the Old Industrial Base .......... 175
10.5 Summary ............................................... 175
Case Study 8 ............................................... 176
References ................................................. 179
11 Industrialization and Technological Progress ............... 181
11.1 Industrialization During the Pre-Reform Era ........... 182
11.1.1 Economic Recovery .............................. 182
11.1.2 Great Leap Forward (1958-60) ................... 182
11.1.3 Preparing for War .............................. 184
11.1.4 Great Leap Outward ............................. 184
11.2 Industrialization During the Reform Era ............... 185
11.2.1 General Background ............................. 185
11.2.2 Multiregional Differences ...................... 187
11.2.3 Rural Industrialization ........................ 188
11.3 Technological Progress ................................ 189
11.3.1 An Overview .................................... 189
11.3.2 China's Efforts on Innovation .................. 190
11.3.3 Institutional Constraints ...................... 191
11.4 Intellectual Property Rights .......................... 192
11.4.1 General Situation .............................. 192
11.4.2 Unresolved Problems ............................ 193
Annex ...................................................... 194
References ................................................. 195
12 International Economic Engagement .......................... 197
12.1 Historical Review ..................................... 198
12.1.1 How Autarkic Was China? ........................ 198
12.1.2 External Influences ............................ 198
12.2 Toward an Open Economy ................................ 199
12.2.1 China Opens Its Door ........................... 199
12.2.2 WTO Membership ................................. 200
12.2.3 Tariff and Non-Tariff Barriers ................. 201
12.2.4 Currency Convertibility ........................ 201
12.3 Foreign Trade ......................................... 203
12.3.1 Foreign Trade Regime in Transition ............. 203
12.3.2 China's Trade Performance ...................... 204
12.3.3 Structural Changes ............................. 206
12.4 Understanding China's Trade Performance ............... 208
12.4.1 Methodology .................................... 208
12.4.2 Estimated Results .............................. 210
12.5 Summary ............................................... 211
Annex ...................................................... 212
References ................................................. 213
13 Inward and Outward Direct Investments ...................... 215
13.1 Some Basic Concepts ................................... 216
13.1.1 Equity Joint Venture ........................... 216
13.1.2 Cooperative Joint Venture ...................... 217
13.1.3 Wholly Foreign Owned Enterprise ................ 217
13.2 Inflow of Foreign Direct Investment ................... 218
13.2.1 Sectoral Distribution .......................... 218
13.2.2 Regional Distribution .......................... 220
13.2.3 Contributions to the Chinese Economy ........... 221
13.3 Outward Direct Investment ............................. 221
13.3.1 Historical Evolution ........................... 221
13.3.2 China's 'Going Out' Strategy ................... 222
13.3.3 Characteristics and Directions ................. 224
Annex ...................................................... 227
References ................................................. 232
14 Doing Business in China .................................... 233
14.1 Starting a Business ................................... 234
14.1.1 First Things First ............................. 234
14.1.2 Selecting a Business Type ...................... 234
14.1.3 Drafting a Business Plan ....................... 235
14.1.4 Multiregional Differences ...................... 235
14.2 Ease of Doing Business Across China ................... 237
14.2.1 Registering Property ........................... 237
14.2.2 Getting Credit ................................. 237
14.2.3 Enforcing Contracts ............................ 238
14.2.4 Summary ........................................ 239
14.3 Understanding China's Business Culture ................ 240
14.3.1 Collectivism Versus Individualism .............. 240
14.3.2 What Can(not) Be Done in China ................. 241
14.4 Managing Cultural Differences ......................... 242
14.4.1 Obstacles to Cross-Cultural Exchanges .......... 242
14.4.2 Tips in Cross-Cultural Negotiations ............ 242
Annex ...................................................... 243
References ................................................. 249
15 Understanding the Chinese-Speaking Economies ............... 251
15.1 The Greater China Area ................................ 252
15.1.1 Hong Kong ...................................... 252
15.1.2 Macau .......................................... 253
15.1.3 Taiwan ......................................... 254
15.1.4 Summary ........................................ 254
15.2 A Multiregional Economic Comparison ................... 256
15.2.1 Social and Economic Differences ................ 256
15.2.2 Complementary Conditions ....................... 257
15.2.3 Summary ........................................ 258
15.3 Cross-Strait Economic Relations ....................... 259
15.3.1 Historical Evolution ........................... 259
15.3.2 Bilateral Economic Cooperation ................. 261
15.3.3 Direct Air and Shipping Services ............... 262
15.3.4 Future Perspective ............................. 264
15.4 Overseas Chinese Economics ............................ 264
15.4.1 A History of Chinese Emigration ................ 264
15.4.2 Distribution of Overseas Chinese ............... 264
15.4.3 Global Economic Contributions .................. 265
Annex ...................................................... 265
Case Study 9 ............................................... 267
References ................................................. 272
Chronology .................................................... 273
Glossary ...................................................... 277
Index ......................................................... 279
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