Development Bank of Japan
Research Report
No. 39China’s Economic Development and the Role ofForeign-Funded Enterprises

May 2003

Economic and Industrial Research Department
Development Bank of Japan

This report was originally published in Japanese as Chosa No. 47
in November 2002.

Contents
Summary ............................................................................................................................................... iii
Introduction ........................................................................................................................................... 1
I

China’s Economic Growth and Structural Changes .................................................................. 2
1. Economic Growth and Regional Imbalances........................................................................... 2
1.1. Economic Growth ............................................................................................................ 2
1.2. International Comparison of Economic Scale.................................................................. 3
1.3. Regional Imbalances ........................................................................................................ 5
2. Economic Trends, Financial and Fiscal Policy in the 1990s.................................................... 8
2.1. Trends in GDP by Expenditure ........................................................................................ 8
2.2. Monetary Policy and Deflation ...................................................................................... 10
2.3. Fiscal Policy, Government Deficit and Government Debt............................................. 12
3. Trade and Foreign Direct Investment .................................................................................... 15
3.1. Trade Trends and Structural Changes ............................................................................ 15
3.2. Foreign Direct Investment in China ............................................................................... 21
3.3. International Balance of Payments and Exchange Rate Policy...................................... 25
4. Changes in Industrial Structure.............................................................................................. 27
4.1. GDP by Industry ............................................................................................................ 27
4.2. Production by Industry ................................................................................................... 30
4.3. Analysis of Production Inducement Factors (Silkin Analysis) ...................................... 31
4.4. Analysis of Self-Sufficiency Rates (Skyline Analysis).................................................. 33

II

The Role of Foreign-Funded Enterprises and Problems of State-Owned Enterprises ......... 38
1. The Dual Structure of Foreign-Funded Enterprises and State-Owned Enterprises ............... 38
2. The Role of Foreign-Funded Enterprises............................................................................... 38
2.1. The Role of Foreign-Funded Enterprises in Production ................................................ 38
2.2. The Role of Foreign-Funded Enterprises in Fixed Asset Investment ............................ 41
2.3. The Role of Foreign-Funded Enterprises in Trade......................................................... 44
2.4. The Role of Foreign-Funded Enterprises in Trade Structure ......................................... 46
3. R&D Investment in China ..................................................................................................... 48
3.1. The Role of Foreign-Funded Enterprises in R&D ......................................................... 48
3.2. R&D Personnel .............................................................................................................. 49
4. The Problems of State-Owned Enterprises ............................................................................ 53
4.1. Reform of State-Owned Enterprises and Non-Performing Loan ................................... 53
4.2. The Labour Market and Unemployment ........................................................................ 55
4.3. Latent National Debt ...................................................................................................... 58

Conclusion............................................................................................................................................ 59
Appendix .............................................................................................................................................. 60
References ............................................................................................................................................ 61

Development Bank of Japan Research Report/ No. 39iChina’s Economic Development and the Role of Foreign-FundedEnterprises
Summary
1. China’s rapid economic expansion has inrecent years been perceived as a threat in Japan,
while at the same time some observers havesuggested that growth will reach a limit at somepoint and turn into a slow down. Japanese perceptions of Chinese development are thus highlypolarized. The main aim of this report is to present an overall picture of the Chinese economy
based on macro-economic statistics and otherdata.
2. China has maintained stable, rapid economic expansion since the government changed
its policy towards reform and opening up to theoutside world in 1978. In dollar terms it is now
the world’s seventh largest economy, and thesecond largest in terms of purchasing power parity. Per capita income is still only approximately
one-fortieth the level of Japan, or aroundone-seventh in terms of purchasing power parity.
Nevertheless, economic development varies
widely by region within China, and some coastal
regions exhibit income levels to rival NIEs
(newly industrializing economies). These prosperous regions can be regarded as powerfulcompetitors against Japan.
3. China’s imports and exports of industrial
products are growing. Both imports and exportsof electric equipment and machinery are considerable, where China is a net importer. The next
largest category of exports is light industrial
products such as fibres and apparel, in which
China is a net exporter. China is also a net importer of materials such as plastics and iron/steel,and its overall balance for goods is more or lesszero.
Foreign direct investment towards China
has been booming since acceleration of the government’s trend towards reform and opening up
in 1992. The largest part of foreign direct investment is in manufacturing industry, and thepresence of foreign-funded enterprises (FFEs) in
China is rapidly increasing.

4. Economic development involves not only asimple GDP expansion, but also structuralchanges in industry. Chinese economic development since 1992 has been concentrated insecondary and tertiary industries, and the main
factor behind growth in secondary industry has
been rising productivity. We regard this aslargely attributable to introduction of modern
production technology by FFEs. Within lightindustries, production has expanded in textile/leather goods, and wood processing/furniture; within processing and assembly
industries, production has grown in transportation machinery, electric equipment, and electronics. Consequently, self-sufficiency rates as
displayed in skyline graphs are particularly highin two industrial areas, the first being textiles,
textile/leather goods, and the second being electric equipment and electronics. The self-sufficiency rate of the former is well over 100%.
5. Dependence on inflow of foreign capital is amajor characteristic of economic development in
China. Share of FFEs in mining and manufacturing production rose to 15.9% in 1999. Bycontrast, the share of state-owned enterprises(SOEs) has fallen to 28.2%. Among large enterprises, the production share of FFEs in 2000 had
overtaken SOEs at 27.4% and 23.5% respectively. FFEs exhibit relatively high production
shares in the electronics and textile/leather goods
sectors. Labour productivity indicates that a large
gap has opened up between FFEs and SOEs,
with secondary industry in China now displaying
a dual structure.
6. Foreign-funded enterprises (FFEs) are responsible for approximately half of China’s
overall imports and exports, and are principally
involved in processing trade (exporting of products processed from imported parts and materials). Their balance of trade for goods was negative until around the middle of the 1990s, due tofactors such as importation of capital goods.
Development Bank of Japan Research Report/ No. 39iiiHowever, the balance has recently gone into theblack as a result of development of processing
trade as scheduled. Within categories of traded
goods, major import items include electronic
components, plastics and chemical fibres, while
major export items are home appliances, personal computers, fibre products and apparel. This
trend fits in with the pattern of processing trade.
FFEs exhibit high weightings in all of thesecategories, and processing trade by FFEs is thus
estimated to be driving Chinese trade in theseindustries.
7. R&D investment is essential for autonomous economic growth over the long term, andthe extremely low level of R&D in China is thus
a major challenge to be overcome. In almost allindustries, FFEs actually display lower rates of
R&D expenditure to sales than SOEs. FFEs
therefore appear to be contributing in only a limited way to R&D in China so far, despite theirmajor contribution to the Chinese economy interms of production and trade.

8. Reform of SOEs accelerated in 1998 andtheir number of employees is falling steeply.
FFEs are taking on more employees, but notenough to compensate fully for workforce reduction at SOEs. In this respect as well, FFEs are
only making a limited contribution. The real
unemployment rate rises after including people
laid off by SOEs, reaching 8.7% in 2001.
9. The Chinese economy thus displays a dual
structure composed of FFEs and SOEs, but tograsp the full picture it is also necessary to consider private-sector enterprises, which show
strong growth prospects. It is important to consider how these three groups will affect eachother, and, in particular, how the increase in
unemployment expected from SOEs will affectthe competitiveness of the private sector, especially that of FFEs. A clear understanding of thesituation requires examination of a broad spectrum of political, social and other issues, in addition to economic factors, and this is beyond thescope of this report.
[Tadateru Hayashi (e-mail: tahayas@dbj.go.jp)]

iv

Development Bank of Japan Research Report/ No. 39

Introduction
The Chinese economy’s dramatic progress inrecent years has come to global attention. In
Japan in particular, concerns have grown over“hollowing out” of industry as corporations
have transferred plants to China, and China iswidely perceived as a threat in Japan. On theother hand, not a few commentators have suggested that at some point growth will reach alimit and slow down, due to rising unemployment stemming from reform of state-owned
enterprises (SOEs), and expansion in non-performing loans.
Views of the Chinese economy thus fluctuate between these two poles. This reportaims mainly to shed light on the overall pictureof Chinese economic power, using macroeconomic statistics released by the Chinese
government.
Chinese macro-economic statistics sometimes use different definitions compared toJapan and Western developed nations, and careis needed with regard to reliability and accuracy.
Nevertheless, we believe that analysis of thesemacro-economic statistics is essential, and thata largely correct picture is possible throughexamining a wide range of statistics.
Chapter I presents a summary of Chinese
economic expansion and structural changes affecting industry, derived from basic macroeconomic statistics. Chapter II focuses on therole of foreign-funded enterprises (FFEs) in
Chinese economic development using a range of
economic statistics, and reveals the dual structure in secondary industry, composed of FFEs
and SOEs. In contrast to rapid progress among
FFEs, the SOEs undergoing reform are burdened
by inefficient production due to excessive staffing. This is creating non-performing loan andunemployment problems, and we examine theeffects of these problems on the government’s
finances.

Development Bank of Japan Research Report/ No. 39

1

I China’s Economic Growth andStructural Changes
1.

Economic Growth and Regional
Imbalances
1.1.

Economic GrowthOver 50 years have passed since the establishment of the People’s Republic of China in 1949.
This can be divided up into three main periods(Figures 1-1 and Table 1-1): the period of reconstruction (1949-1965), the Cultural Revolution (1966-1978), and the period of reform andopening up (1979-).
The period of reconstruction refers to timefrom 1949, when Mao Tse-tung established the
109People’s Republic of China and its Communist
Party administration, until 1965, which marked
the start of the Cultural Revolution. The socialist state was built up during this period. Mao
Tse-tung initiated the Great Leap Forward1 in
1958, which involved collectivization of agriculture, and successive monopolization of industry and commerce by state-run enterprises.
However, production capacity actually fell during the Great Leap Forward, which set highly
ambitious targets without providing labour incentives. Three years of natural disasters from1959 also resulted in a severe famine, and theeconomy stagnated. According to official statistics, average real growth during the period ofreconstruction was a high 6.0%. However, during the Great Leap Forward it is believed thattrillion yuan%

Period of reconstruction

The Cultural Revolution

Period of reform and opening up

20

8

10

7
6

Tiananmen Squareincident

5
Political conflict

4
3

0
-10
-20

2
1

30

-30

Natural disaster0-40
52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00
Nominal GDP (left scale)Real GDP growth ratio（right scale）

Figure 1-1 Growth in Nomibnal and Real GDP Trend
Source: "China Statistical Yearbook"

Table 1-1 The Chinese Economy's Long-Term Growth Trend
Period of reconstruction
Cultural Revolution
Period of reform andopening up

RealGrowth rate
Note
growth rate of population
1949-65
6.0%
1.8% Year 59-61 Natual disaster
1966-78
6.3%
2.2% Year 67-68 Political conflict
1979-92
9.4%
1.4% Development in agriculture, Reform of state-run
enterprises, 89 Tiananmen Square incident
1993-01
9.3%
1.0% Year 92: Tour to the shouth of China by Deng, year
01: accession to WTO

Note: Growth rates are geometric averages. Growth for the period of reconstruction is the average from 1953.
1

Mao Tse-tung believed that socialist mobilisation ofChina’s manpower under his Great Leap Forward concept
would deliver dramatic expansion in production capacity,
under the slogan of over-taking the UK in 15 years.

2

Development Bank of Japan Research Report/ No. 39

regional authorities reported artificially inflated
figures to the central government, to give theappearance of meeting targets. The figures forthis period should thus be treated with caution,
especially during the Great Leap Forward.
Following the period of reconstruction, theCultural Revolution era lasted 13 years from1966 to 1978. This was a period of politicalchaos, accompanied by systematic destructionof business management upon capitalist lines,
and other policies including sending urban
dwellers into the countryside, known as theRustication Movement2. These dramatic developments took place on a national scale, resulting in severe economic stagnation. The official
Chinese figures claim strong average annual
growth of 6.3%, higher than in the period ofreconstruction, but the veracity and accuracy of
GDP statistics during the Cultural Revolution ishighly doubtful and it should be treated carefully.
The arrest of Jiang Qing, Mao Tse-tung’s
widow, and the other three members of theGang of Four followed Mao’s death in 1976.
Deng Xiao-ping then took the helm of central
government in December 1978, transforming
economic policy into one of reform and opening up to the outside world. Reforms kicked off
in agriculture with the dissolution of people’scommunes, while the government also pursued
a policy of aggressive opening up to the outside
world, such as through setting up special economic zones along the southern seaboard. This
period of reform and opening up lasting from1979 to the present has been a time of stable,high growth in excess of previous periods, ataverage real GDP expansion of over 9%.
GDP statistics during the period of reformand opening up appear to have become moreaccurate and reliable. We believe the average
figure of over 9% to be largely credible.3
The current period of reform and opening
up is normally divided up into two parts, withthe dividing year being 1992. At Chinese New
2

The Rustication Movement involved the forced relocation of mainly young, urban workers to rural villages, inorder to achieve their ideological reform.
3
However, the debate on the accuracy of Chinese GDP
data has recently re-started, through examining consistency with energy consumption figures (for example, see
The Economist issue of March 16, 2002).

Year in 1992, Deng Xiao-ping visited Shanghai
and other cities along the southern seaboard.
During this tour, Deng declared that the courseof reform and opening up would not change,
and that further progress was needed. This
marked the debut of the “socialist market
economy”4 concept, which brought in privatisation of state-owned enterprises and reform of
the financial system, and also introduced indirect control methods for financial and fiscal
policy to replace direct methods, which we
examine later in this report. The process of
opening up to the outside world was also accelerated, extending the special economic zones incoastal regions to the interior5, and allowing
gradual investment by foreign-funded enterprises in China’s tertiary industries like retailing, distribution and real estate.
This acceleration in the process of reformand opening up resulted in investment in China
from Japan, Western industrialised nations andAsian NIEs, who had been reluctant after the
Tiananmen Square incident in 1989, reachingan unprecedented scale. The boom in foreign
direct investment from 1992 resulted in China’s
taking its place among leading global economies.
1.2.

International Comparison of
Economic Scale

The economic growth prompted by reform andopening up policies resulted in China’s presence in the global economy increasing. Tables
1-2 and 1-3 show global rankings by GNI6 andper capita GNI. In 2000, China’s GNI ranked
4

The socialist market economy concept was introduced
through Jiang Ze-min’s report to the party congress in
October 1992, which maintained that socialism does notnecessarily equal a planned economy, nor capitalism amarket economy, and that a market economy is possible
under socialism.
5
Shenzhen, Zhuhai and Shantou became the first special economic zones in 1979, providing incentives forforeign investment. This expanded to 14 coastal cities in
1984, and the seventh five-year plan starting in 1986 laid
down rules for foreign investment all along China’s
coastal region. Opening up of opportunities in interior
regions started in 1992.
6
Gross national income: Net receipts from
non-residents added to GDP, approximately the same as
GDP in value terms.
Development Bank of Japan Research Report/ No. 39

3seventh out of 207 countries at $1,063 billion.
In the same year Japan’s GNI was $4,519 billion, giving China roughly one-quarter of theeconomic scale of Japan. However, China’s
population of 1.27 billion people, the largest in
the world, resulted in per capita GNI of only
$840 (global ranking: 141st), putting it among
low-middle income countries7. This is onlyaround one-fortieth of Japan’s $35,620 per person.
The data in the figures above shows that
China’s overall economic scale is extremely
large, and if annual expansion of 7-9% continues China might present an economic threat to

not just Japan, but to the whole world. On theother hand, per capita income presents a completely different picture of the Chinese economy.
China bases its economic management on
five-year plans, and is currently in its tenth suchplan spanning from 2001 to 2005. This plan’slong-term target is doubling of 2000 GDP by
2010, en route to which its aims at 2005 GDP
of RMB12.5 trillion ($1.5 trillion at the current
exchange rate), and per capita GDP of
RMB9,400 ($1,133). This target demands a realannual growth rate of around 7%.

Table 1-2 Leading Contries Ranked by GNI (2000)(billion US$)Rank
US dollar terms
1 United States
2 Japan
3 Germany
4 United Kingdom
5 France
6 Italy
7 China
8 Canada

Rank
PPP terms
9,602 1 United States
4,519 2 China
2,064 3 Japan
1,460 4 India
1,438 5 Germany
1,163 6 France
1,063 7 United Kingdom
650 8 Italy

9,601
4,951
3,436
2,375
2,047
1,438
1,407
1,354

Source: The World Bank, “World Development Indicators 2002”

Table 1-3. Per Capita GNI Rankings（US$/person）
Rank
5
7
54
84
103

141

US dollar terms
Japan
United States
：
Korea
：
(Shanghai）
Malaysia：
Thailand：（the coastal region）
：
China

Rank
35,6203
34,100 12
8,910
4,174
3,380

49
77

2,000
92
1,370

124

840

Source: The World Bank, “World Development Indicators 2002”

7

The World Bank’s per capita GNI categories are: low
income = $755 or less; low-middle income = $756-2,995;
high-middle income = $2,996-9,265; high income =$9,266 and over.

4

Development Bank of Japan Research Report/ No. 39

PPP terms
United States
Japan：(Shanghai）
Korea：
Malaysia：（the coastal region）
Thailand：China：

34,10027,08019,442
17,300
8,330
6,393
6,320
3,920

International comparisons of economic
scale must of course pay attention to exchange
rate issues. GNI denominated in US dollars canchange markedly depending on exchange rates,
affecting the results of global rankings. One
theory of “appropriate” exchange rates uses
purchasing power parity (PPP), which statesthat exchange rates are appropriate when commodity prices are broadly the same in two
countries. For example, the exchange rate between China and the US is currently around
RMB8.3/$, but commodities are cheaper in
China than in the US, so RMB8.3 in China hasmore value in real terms than $1 in the US.
Consequently, an “appropriate” exchange rate
allowing the same purchasing power would require RMB appreciation. In other words, the
RMB is currently under-valued, and making
allowances for this would give China greater
economic scale in a global comparison.
We have therefore included the WorldBank’s ranking of economic scale using PPP
in Table 1-2. This gives China a GNI scale of$4,951 billion, close to five times larger thanusing the usual exchange rate. This is higher
than Japan’s $3,436 billion and places China
second behind the US. Furthermore, the gap inper capita GNI (Table 1-3) also shrinks, so thatat $3,920 per person (global ranking: 124th).
China’s level becomes approximately oneseventh that of Japan’s $27,080.
1.3.

Regional Imbalances

Turning from China’s overall economic scale to
China’s domestic economy, various imbalances
can be found. These imbalances can be examined with reference to factors such as regional,
type of industry and the urban/rural divide. We
will examine here the regional imbalances,which should be noted in examining the Chinese economic power.
China can be divided into three regions:the coastal region, the centre, and the west. Thisis the same system used by the Chinese government for regional development planning andother purposes.8 As shown in Figure 1-2, the8For example, the tenth five-year plan describes development strategies for these three regions in section two,
chapter eight.

western region9 is by far the largest in area
(72% of total area), followed by the central region (17%), and then the coastal region (11%).
On the other hand, as shown in Table 1-4,
China’s population of 1.28 billion (end of 2001)
is roughly equally divided between these three,with the coastal region containing 479 million
people (38%), the centre 404 million (33%),
and the west 364 million (29%). Consequently,
the population density of the western region is
the lowest (53 people per square kilometre),followed by the centre (242 people per square
kilometre), with the coastal region having thehighest density (450 people per square kilometre).10
Regional shares of GDP in 2001 were 64%
for the coastal region, 28% for the centre, and
19% for the west. The national average per capita GDP figure was RMB7,543, and regional
figures show income rising steadily in an eastern direction: west RMB5,007, centre RMB
6,712, coastal region RMB12,811. Incomes in
the coastal region are thus double the levels of
the west and the centre. The coastal region’s per
capita GDP is $1,548 after conversion into dollars, or at least $7,000 when converting according to PPP, which gives a level similar to
Thailand.
Differences become more marked whenlooking at data for individual provinces, as
shown in Figure 1-3. China contains 22 provinces, five autonomous regions, and four municipalities11, of which the most prosperous is
Shanghai (6,000 square kilometres, populationof 16.14 million people) with per capita GDP of
RMB37,382. This is equivalent to $4,516, putting it close to the level of Malaysia. Conversion using PPP gives a figure $21,037 per person, putting it above South Korea if included

The Inner Mongolian Autonomous Region and the
Guangxi Zhuang Autonomous Region were previously
included in the central region, but were re-classified into
the western region accompanying the Western Development scheme.
10
In 2000, Japan had a population of 126.92 million
people and total area of 377,873 square kilometres, at adensity of 335.9 people per square kilometre.
11
Hong Kong and Macau are treated separately in Chinese statistics and are not included here.
9

Development Bank of Japan Research Report/ No. 39

5The coastal region
The centre region
The west region

Heilongjiang
Beijing
Ningxia

Jilin

Tianjin

Urumqi
Liaoning

HohhotXinjiang

Inner Mongolia

Hebei
Shanxi

YinchuanLanzhou

Golmud

Xi'an

Gansu

Qinghai

Shandong

Jiangsu

Henan

Shaanxi

Anhui
Lhasa
Tibet

Chongqing

SichuanZhejiang
Hunan

Guiyang
Provinces

Autonomous

Municipalities

Total

Coastal

8

0

3

11

Centre

8

0

0

8

West

6

5

1

12

Total

22

5

4

31

Jiangxe
HujianGuizhou

YunnanShanghai

Hubei

ChengduKunmingNanning

Guangdong

Guangxi

HainanFigure 1-2. China's Provinces, Autonomous Regions and Municipalities
Note: The Inner Mongolian Autonomous Region and the Guangxi Zhuang Autonomous Region were previously includedin the central region, but were re-classified into the western region accompanying the Western Development scheme.

Table 1-4. Regional Economic Indicators (2001)
Land Area（10,000sq.km）
coastal

106.6

share
11%

centre166.9

17%40,414

west

687.0

72%

36,447

errors

0.0

0%

2,844

National Total

960.5

Real
Per
Nominal GDP
Trade Balance Direct Investment
Capita growth rate
(RMB100（100 Mil US$） (100 Mil US$)
(1993GDPmillion）
2000)
(RMB)
share
share
share
61,393
64% 12,811
193
86%
403
86%
9.7%
(170)
32% 27,125
28%
6,712
30
13%
41
9%
9.3%
(89)
29% 18,248
19%
5,007
8.0%
2
1%
19
4%
(66)
2% -10,833
-11%
0
0%
5
1%

Population（10,000
persons）
share
47,92238%

100% 127,627

100%

95,933

Note:

100%

7,543
(100)

9.1%

225

100%

469

100%

The cumulative total of regional figures differs from the overall figure. Bracketed figures in the per capita GDP
column are index values, where 100 = the national average.
Source: “China Statistical Yearbook”

6

Development Bank of Japan Research Report/ No. 39

US dollar

PPP

5,000
4,500

20,000

4,000
3,500

15,000

3,000
2,500

10,000

2,000
1,500

5,000

1,000

west

0
National Total

Gansu

Guizhou

Tibet

Shaanxi

Guangxi

YunnanSichuanNingxia

Qinghai

Chongqing

Inner Mongolia

centreXinjiang

Anhui

Jiangxe

Henan

Shanxi

Jilin

Hunan

Hubei

coastal

Heilongjiang

Hebei

HainanLiaoning

Shandong

HujianJiangsuGuangdong

TianjinZhejiang

Beijing0

Shanghai

500

Figure 1-3. Per Capita GDP by Provinces (2001)
Note:

The right-hand scale uses conversion by World Bank purchasing power parity for 2000. Using dollar conversions,
Shanghai’s per capita GNI is similar to Malaysia’s, with Beijing similar to Thailand, the western region’s averagesimilar to Senegal, and Guizhou Province close to Uganda. Conversion according to purchasing power parity places
Shanghai close to South Korea, the coastal region’s average close to Thailand, the western region’s average close to
India, and Guizhou Province close to Cambodia.
Source: “China Statistical Yearbook”

in country rankings. By contrast, the least
prosperous area is Guizhou Province (176,000
square kilometres, population of 37.99 million
people) with per capita GDP of RMB2,895(equivalent to $350, or $1,629 using PPP), only
one-thirteenth the level of Shanghai.
In case of Japanese provinces, Tokyo has
the highest per capita income at ¥4.230 million,
while the lowest is Okinawa at ¥2.183 million12.
Tokyo’s income level is thus around double thatof Okinawa. By contrast, China displays farlarger regional imbalance in income, with someareas achieving the level of almost a developed
country, and others only managing the level ofthe poorest countries. Furthermore, such regional variations are widening, with averageannual growth in real terms since 1993 having
reached 9.7% in the coastal region, 9.3% in thecentre, and only 8.0% in the west. It is in response to this trend that the Chinese government formulated its Western Development

scheme within the tenth five-year plan(2001-2005).
It is thus clear that China’s narrow coastal
strip is driving economic expansion, and this ispartly a result of the concentration of foreign
direct investment and trade in this region. The
coastal region is generating 86% of China’s
trade surplus and is attracting nearly 86% offoreign direct investment. Consequently, it
makes more sense to regard the coastal regionof China as Japan’s economic partner or rival,
rather than China as a whole. When appraising
China’s economic power in relation to Japan,
we consider it wiser to use data for the coastal
region alone, rather than average figures for thewhole of China. This coastal region has apopulation of 490 million people with GDP of$672.8 billion (2000, dollar conversion), andcan thus be regarded as a major country in its
own right.

12

According to the Cabinet Office’s Prefectural Economic Accounts (1998).
Development Bank of Japan Research Report/ No. 39

7

2.

and public sectors providing 37.7%. China istypical of a developing country in its highweighting from fixed capital formation compared to Japan and the US, as shown in Table
1-5. Formation of fixed capital can be financed
by domestic savings (Figure 1-5), and the average GDP weighting of fixed capital formationin 1990-2001 was 38.2%, compared to the average savings rate of 40.3%.

Economic Trends, Financial and Fiscal
Policy in the 1990s
2.1.

Trends in GDP by Expenditure

We next examine China’s economic trends andpolicies since 1990. Figure 1-4 shows thebreakdown of expenditure categories for realGDP, with private consumption providing
47.1%, and fixed capital formation by private

billion yuan
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
90

91

92

93

94

95

96

97

98

99

00

01

Exports (Net)
Changes in Inventories
Gross Fixed Capital Formation
Government Consumption Expenditure
Household Consumption Expenditure

Figure1-4. Real GDP by Expenditure Categories (1995 prices)
Note:
Converted into real terms using GDP deflator.
Source: IMF, “International Financial Statistics”

Table1-5. GDP by Expenditures for China, Japan and the US(nominal)
GDP
Household Consumption Expenditure
Government Consumption Expenditure
Gross Fixed Capital Formation
Changes in Inventories
Exports(Net)
Error

China
(2001, Bil yuan, %)9,746
100.0%
4,589
47.1%
1,314
13.5%
3,672
37.7%
-34
-0.4%
205
2.1%
0
0.0%

Japan
(2001, Bil yen, %)503,304
100.0%
283,652
56.4%
88,31217.5%
129,874
25.8%-1,708
-0.3%
3,174
0.6%
0
0.0%

United States(2001, Bil US $, %)10,082100.0%
6,987
69.3%
1,542
15.3%
1,963
19.5%
-60
-0.6%
-349
-3.5%
0
0.0%

Note:
Fixed capital formation includes both private and public sectors.
Sources: IMF, “International Financial Statistics, China Statistics Abstract”, and Cabinet Office, “Annual Report on National
Accounts”

8Development Bank of Japan Research Report/ No. 39

Figure 1-6 below shows that China’s real
GDP expanded at a high rate in excess of 10%
in the early 1990s. Growth has subsequently
slowed down, but still maintaining a high rateof 7.3% in 2001. Contribution by expenditurecategories show that the driver of expansion in
the early 1990s was fixed capital formation,reflecting the investment boom triggered byacceleration of reform and opening up policies.
In the meantime, the contribution from private
46

consumption held steady at a little under 5%.
The central role of processing trade has resulted
in imports rising in tandem with exports, so theweighting of net exports in GDP, and their contribution to GDP growth, is small. Chinese
economic expansion thus largely depends oninternal demand, and major changes in thegrowth rate mainly reflect trends in fixed capital formation.

%

44
42
40
38
36
34
32

Capital Formation Rate

Saving Rate

30
90

91

92

93

94

95

96

97

98

99

00

01

Figure 1-5. Capital Formation and Saving Rates
Sources:“China Statistical Yearbook,” etc.

20%
15%
10%
5%
0%
-5%
90

91

92

93

94

95

96

97

98

99

00

01

Net Exports
Changes in Inventories
Gross Fixed Capital Formation
Government Consumption Expenditure
Household Consumption Expenditure
Growth Rate

Figure 1-6. Real GDP Growth and Contribution by Expenditure Categories
Note:
Converted into real terms using GDP deflator.
Source: IMF, “International Financial Statistics”

Development Bank of Japan Research Report/ No. 39

9

2.2.

year in response: 6.4% in 1992 → 14.7% in
1993 → 24.1% in 1994. In order to combat
inflation, the People’s Bank of China raised
statutory interest rates on loans at state-ownedbanks (Figure 1-8), and by restricting overall
lending. The central government also took
measures to suspend independent developmentof industrial zones and such by local government. These measures took effect and inflation
started to taper off in 1995.
However, the investment boom resulted inexcess production capacity emerging in the late
1990s in manufacturing. This combined witheconomic slow-down from the Asian financial
crisis in 1997, and the prices turned into deflation in 1998. The government initially responded through monetary measures including
lowering of interest rates, but muted recovery
prompted policy reform in 1998. The government embarked on fiscal expansion throughsupplementary issues of national bonds. Other
measures included scrapping control of overall
lending volume, and raising the prices of services such as transportation. Consumer priceindex stopped falling in response to thesemeasures, and deflation halted for the time being in 2000.

Monetary Policy and Deflation

China’s financial policy measures are centredon control of standard interest rates for deposits
and loans at commercial banks by the People’s
Bank of China (central bank). Up to 1998, thePeople’s Bank of China formerly carried out
direct control by regulating total lending by thestate-owned commercial banks, but this has
shifted to indirect control along the introductionof market economy principles. Manipulation ofdeposit reserve rates and open market operations are also introduced.13
The challenge faced by China’s monetary
policy was inflation in the early 1990s, switching to deflation in the late 1990s. The domestic
economy over-heated in the early 1990s as theforeign direct investment boom resulted in
sharply higher investment in real estate and facilities. The money supply also expanded rapidly as banks increased lending, resulting in
inflation (Figure 1-7). Devaluation of the RMB
against the dollar in 1994 also increased inflationary pressure. During this time money supply (M2) rose sharply: 31.3% in 1992 →
37.3% in 1993 → 34.5% in 1994. Growth inconsumer price index then accelerated each
%
40
35
30
25
20
15
10
5
0
-5
91

92

93

94

95

96

97

98

99

00

Growth rate of real GDP
Growth rate of M2
Inflation

Figure 1-7. M2 Growth, GDP Growth and Inflation
Source: “China Statistical Yearbook”

13

Open market operations started in 1996, followed byintroduction of deposit reserve rates in 1998.
10

Development Bank of Japan Research Report/ No. 39

01and Ex-factory Price Index of Industrial Products are still falling, indicating that deflationarypressure is still present.
The People’s Bank of China responded bylowering interest rates for the first time since1999 in February 2002, with the rate on
one-year loans down to 5.31% from 5.85%. The
rate on one-year deposits also fell to 1.98%
from 2.25%.
We attribute China’s deflation more tosupply-side factors rather than lower demand,since the economy has continued to expand

The differences in monetary policy between the early and late 1990s can be traced
using Marshall’s k. As shown in Figure 1-9,
Marshall’s k was below its trend line in 1993 to
1997, indicating monetary tightening. It subsequently rose above its trend line from 1998,
indicating the switch to monetary loosening
prompted by the Asian financial crisis.
Prices started falling again in 2002 as entry
into the WTO pushed up price competition inindustrial products. Retail Price index, Purchasing Price Index of Major Raw Materials
14

%

12
10
8
6
4
2
0
91

92

93

94

95

96

97

Loans（one year）

98

99

00

01

02

Deposits（one year）

Figure 1-8. Interest Rates on Deposits and Loans
Sources:“China Statistical Yearbook,” etc.

billion yuan
18,00016,00014,00012,00010,000
8,000
6,000
4,000
2,000
0
90
91

1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
92

93

94

95 96
97 98 99
M2
k (right scale）
k's trend line（right scale）

00

01

Figure 1-9. M2 and Marshall’s k
Note:
Source:Marshall’s k = M2 / GDP“China Statistical Yearbook”

Development Bank of Japan Research Report/ No. 39

11National Defense (7.6%), Price Subsidies(3.9%), Science&Technology (5.2%), and Agricultual Production (9.9%).14
As shown in Figure 1-12, fiscal expenditure as a proportion of GDP tended to decline in
the early 1990s, reaching 13.2% in 1995. This
reflected the smaller role in the Chinese economy of state-owned enterprises, a major sourceof tax revenue. Over the same period, the central government’s share of overall (central plus
local government) fiscal revenue declined,raising concerns over diminished central government capacity to control the macro-economy.
Fiscal reform in 1994 consequently aimed atraising the central government’s share of tax
revenue through reform of the tax system, andat expanding revenue through introducing
value-added tax and tightening up tax collection.
Fiscal expenditure relative to GDP started to
expand as a result, climbing to 19.6% in 2001.
Nevertheless, this still remains a low levelcompared to developed countries.15

strongly at around 7% per annum. In otherwords, prices appear to be falling in response toexcess production capacity and increased pricecompetition with foreign products, as a result ofmembership of the WTO.
2.3.

Fiscal Policy, Government Deficit andGovernment Debt

Fiscal policy is another important part of economic policy. As shown in Figure 1-10, tax
revenue forms the main part of overall income
for central and local government. Tax revenue
provided 93.9% of overall income in 2000. Industrial and Commercial Tax is the largest
source of tax revenue (77% of overall fiscal
income), of which 34% came from value-addedtax (basic rate of 17%). The value-added tax is
equivalent to consumption tax in Japan. As
shown in Figure 1-11, fiscal expenditure in2001 was mainly composed of Culture, Education spending (17.8% of expenditure excluding
government bond costs), Capital Construction(13.3%), Government Administration (11.6%),
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0

billion yuan
Except Tax
Income Tax of Collective-owned Enterprises
Income Tax lf State-owned Enterprises
Agricultural and Related
Tariffs
Other Indusrial and Commercial Tax
Value-added Tax
Total

90

91

92

93

94

95

96

97

98

99

00

01

Figure 1-10. Fiscal Revenue Breakdown (Central + Local Government)(Excluding Government Bond Revenue)（2000）
Note: 2001 breakdown not available.
Source: “China Statistical Yearbook”

14
Government support for state-owned enterprises isreported as negative fiscal revenue, and amounted to
RMB30 billion in 2001.
15
Fiscal expenditure as a proportion of GDP: Japan
38.1%, USA 30.0%, UK 39.1% (1999).

12

Development Bank of Japan Research Report/ No. 39

RMB billion
2,000
OthersAgricultual Production
Science,Technology
Price Subsidies
National Defense
Government Administration
Capital Construction
Culture, Education

1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
90

91

92

93

94

95

96

97

98

99

00

01

Figure 1-11. Fiscal Expenditure Breakdown (Central + Local Government)(Excluding Government Bond Costs)
Source: “China Statistical Yearbook 2001”
RMB billion
2000

20%

1500

15%

1000

10%

500

5%

0

0%

-500

-5%

-1000
-1500

-10%

-2000

-15%

-2500

-20%
90

91

92

93

94

95

96

97

98

99

00

01

Expentiture (incl. domestic ana foreign borrowings)
Revenue (excl. domestic and foreign borrowings)
Expenditure/GDP (right scale)
Balance

Figure 1-12. Fiscal Revenue and Expenditure in China(Central + Local Government)
Source: “China Statistical Yearbook 2001”

China’s greatest fiscal problem is its
chronic fiscal deficit (Figures 1-12 and 1-13).
The deficit has consistently widened since acceleration of reform and opening up policies
from 1992. In response to this, the ninth
five-year plan (1996-2000) targeted wiping outof the primary balance deficit during the periodof the plan. However, this target was shelved
following the switch to aggressive fiscal policy

in 1998, and each year since then the government has issued large volumes of long-term
construction bonds (RMB100 billion in 1998,
RMB110 billion in 1999, RMB150 billion in
2000, RMB150 billion in 2001, RMB150 billion scheduled in 2002).16 Consequently, the16
GDP boosting effects from long-term construction
bonds are estimated at +1.5% in 1998 (GDP 6.3%
→7.8%), +2.0% in 1999 (GDP 5.2% →7.2%), +1.7% in

Development Bank of Japan Research Report/ No. 39

13

RMB billion

450
400
350
300
250
200
150
100
50
0

30%
25%
20%
15%
10%
5%
0%

90

91

92

93

94

95

96

97

98

99

00

01

Other Deficit
Primary Balance Deficit
Fiscal Deficit/GDP
Fiscal Dependence on Public Bonds（right scale）

Figure 1-13. Breakdown of Fiscal Deficit (Central + Local Government)
Source: “China Statistical Yearbook 2001”

2500

%

RMB billion

25

2000

20

1500

15

1000

10

500

5
0

0
90

91

92

93

94

95

96

97

98

99

00

01

Outstanding Government Bonds
Outstanding Foreign Bonds
Outstanding Government Bonds + Foreign Bonds / GDP (right-hand scale)Figure 1-14. Outstanding Government Debt
Note:

Outstanding national bonds estimated from issuance and redemption for
1980-1992, 1999, and 2001.
1998 does not include RMB270 billion in extraordinary bonds for capital injections into state-owned banks.
Outstanding foreign bonds estimated from issuance and redemption foryears up to 1998, and 2001
Source: “China Statistical Yearbook”

2000 (GDP approximately 6.6% →8.3%), and +1.8% in2001 (GDP approximately 5.5% →7.3%) (Xinhua Net,
April 16, 2002).
14

Development Bank of Japan Research Report/ No. 39

primary balance remains in the red, with thedeficit reaching 4.7% of GDP in 2001.17 In recent years fiscal dependence on public bonds
has been running at 23-25%, which is not ashigh as Japan’s current level but higher thanWestern developed nations. The Chinese government used dollar-denominated foreign
bonds18 to finance its fiscal deficit from the late1980s to the early 1990s, but it now depends on
domestic bonds.
Higher issuance of national bonds resulted
in rapid expansion of outstanding government
debt in the late 1990s (Figure 1-14), and in2001 this debt reached RMB203.3 billion including foreign bonds, equivalent to 21.2% ofGDP. This is a low level by international standards19, but latent government debt is growing
rapidly from factors including rising unemployment accompanying reform of state-owned
enterprises (examined later in this report), andnon-performing loans at state-owned banks, so
future developments require monitoring.

3,000
2,750
2,500
2,250
2,000
1,750
1,500
1,250
1,000
750
500
250
0
-250

3.

Trade and Foreign Direct Investment

3.1.

Trade Trends and Structural Changes

To summarise the foregoing, the Chinese
economy has achieved very rapid expansion,
but also faces the major problems of regional
imbalances, deflation and the fiscal deficit.
Against this background, great progress has
been achieved in China’s economic relationshipwith foreign countries, such as through tradeand foreign direct investment.
Since economic growth accelerated in
1993, trade has expanded at a high pace in excess of average annual GDP growth of 9.3%,
with exports growing by an annual average
13.5% and imports rising 13.1% (Figure 1-15).
The balance of trade fell into the red in 1993,
but has consistently been in the black ever since,
thanks to the around 30% devaluation of the
RMB against the dollar in 1994. However, imports have expanded rapidly along with exports,
so the scale of the trade surplus has remainedslight.

$100 million

90

91

92

93

94

95

Exports(agriculture product)
Trade surplus/deficit
Imports(industrial product)

96

97

98

99

00

01

Exports(industrial product)
Imports(agriculture product)

Figure 1-15. Imports and Exports
Source: “China Statistical Yearbook”
17

Fiscal balances relative to GDP: Japan -7.0%, USA+0.2%, UK +1.9% (2000).
18
The current credit rating for dollar-denominated foreign bonds is single-A (Fitch).
19
Outstanding debt relative to GDP: Japan 123%, USA
59%, UK 54% (2000).
Development Bank of Japan Research Report/ No. 39

15

As shown in Table 1-6, Japan is the thirdlargest destination for exports, and the largest
source of imports. Combining exports and imports, Japan is China’s largest trading partner,
and is followed by the US, Hong Kong20, South
Korea and Taiwan.
China achieves a small surplus in its tradewith Japan. It achieves significant surpluses
with the second and third largest trading partners, the US and Hong Kong. On the other hand,
it is consistently in the red in trade with fourthand fifth-placed South Korea and Taiwan.
According to Chinese statistics, the balance of trade between China and Japan is close
to zero (Figure 1-16). By contrast, Japanesestatistics give Japan a large deficit (Figure 1-17),
creating a large discrepancy between the two
sets of figures. This appears to stem mainly
from differences in trade definitions, which result in different handling of intermediary tradefrom Japan going through Hong Kong to China.

Japanese export statistics are based on the initial destination, so exports through Hong Kong
eventually destined for China are counted asexports to Hong Kong. By contrast, Chinese
import statistics are based on the original placeof production, so goods produced in Japan are
counted as imports from Japan even if theycome through Hong Kong. Adjustment ofJapanese trade statistics is possible by calculating Hong Kong’s re-exports to China of goods
from Japan, using Hong Kong trade figures.
This adjustment results in a balance of payments close to zero, agreeing with Chinese figures. The discrepancy is thus attributable to intermediary trade via Hong Kong.
Turning to categories of Chinese imports
exports (Table 1-7), the largest 2001 categories
in export value terms were electrical machineryand machinery, with respective shares of 19.2%
and 12.6%. These two categories are followedby light industrial products: woven apparel

Table 1-6. China’s Trading Partners (2001)(100 mil US$)
Total
Value
Total
1 Japan
2 United States
3 HongKong
4 Korea
5 Taiwan
6 Germany
7 Singapore
8 Russia
9 United Kingdom
10 Malaysia
Other

5,098
878
805
560
359
323
235
109
107
103
94
1,525

Export
Share

Value

100
17
16
11
7
6
5
2
2
2
2
30

2,662
450
543
465
125
50
98
58
27
68
32
746

Import

Share
100
17
20
17
5
2
4
2
1
3
1
28

Value
2,436
428
262
95
234
273
137
51
80
35
62
779

Trade

Share

Balance

100
18
11
4
10
11
6
2
3
1
3
32

226
22
281
370
-109
-223
-39
7
-53
33
-30
-33

Source: Ministry of Foreign Trade and Economic Cooperation, “Import and Export Statistics”

20

China includes Hong Kong in its foreign trade statistics, since it has retained economic independence after the
return of sovereignty to China. According to the definitions used for Chinese trade statistics, intermediary trade
is not included. However, the difficulty of distinguishingclearly between intermediary trade and general trademeans that figures for Hong Kong may be inflated by asignificant volume of intermediary trade passing throughHong Kong.
16

Development Bank of Japan Research Report/ No. 39

$100 million

700

35%

600

30%

500

25%

400

20%

300

15%

200

10%

100

5%

0

0%

-100

-5%
90

91

92

93

94

95

96

97

98

Exports to Japan
Trade Balance to Japan
Share of Emport to Japan

99

00

01

02

Imports to Japan
Share of Export to Japan

Figure 1-16. Trade between China and Japan (Chinese Statistics)
Share values use the right-hand scale.
Note:
Source: “China Statistical Yearbook”

10,000billion yen

20%

8,000

15%

6,000

10%

4,000

5%

2,000

0%

0

-5%

-2,000-4,000

-10%
90

91

92

93

94

95

96

97

Exports to China
Trade Balance to China
Share of Import to China

98

99

00

01

02

Imports to China
Share of Export to Japan

Figure 1-17. Trade between China and Japan (Japanese Statistics)
Share values use the right-hand scale.
Note:
Source: “Trade Statistics”(7.1%), knit apparel (5.0%), and footwear(3.8%). These five categories form the core ofexports, providing 47.7% of the total. Amongexports to Japan, the top category is again electrical machinery(16.6%), followed by woven
apparel (15.3%), and knit apparel (10.1%). Average growth in exports to Japan was 16.2%
between 1993 and 2001, surpassing growth inoverall exports of 13.7%. Exports to Japan arethus driving overall export growth. Growth inexports of electric equipment has been particu-

larly strong, with average annual expansion
between 1993 and 2001 of 22.6% to all trading
partners, and 37.9% to Japan.
Turning to categories of Chinese imports,
the largest category is again electrical machinery (23.0%), followed by machinery (16.7%),
and mineral fuels (7.2%). Among imports fromJapan, the top category is electric machinery(30.4%), followed by machinery (21.0%), andiron and steel (6.2%). All imports of electric
equipment expanded at an average rate ofDevelopment Bank of Japan Research Report/ No. 39

17

Table 1-7. Import and Export Categories (2001)
With World
ExportElectrical Machinery
Machinery
Woven apparel
Knit apparel
Footwear
Toys
Mineral fuel, oil
Furniture
Leather art
Plasticsum
total
ImportElectrical Machinery
Machinery
Mineral Fuels
Plastic
Iron and steel
Precision Instruments
Organic chemicals
Copper articles
Transport Equipment
Aircraftsum
total
Surplus
Woven apparel
Knit apparel
Footwear
Toys
Furniture
Leather art
Iron steel products
Misc textile products
Prepared meat
Railwaysum
total
Deficit
Mineral fuel, oil
Iron and steel
Plastic
Machinery
Electrical Machinery
Organic chemicals
Copper articles
Ores and slag
Aircraft and parts
Optical instruments
sum
total

Mil US$
Value
51,322
33,626
18,967
13,465
10,092
9,084
8,506
7,562
6,991
6,699
166,314
266,662

Value
55,90940,55917,54915,263
10,949
9,778
8,977
4,887
4,534
4,431
172,836
243,567Value
18,22812,990
9,762
8,813
7,240
6,907
3,946
3,669
2,032
1,991
75,578102,808

Value-9,043-8,699-8,564-6,933-4,587-4,371-4,266-4,086-3,865-3,320-57,734-79,713

Share
19.2%
12.6%
7.1%
5.0%
3.8%
3.4%
3.2%
2.8%
2.6%
2.5%
62.4%
100.0%

Share
23.0%
16.7%
7.2%
6.3%
4.5%
4.0%
3.7%
2.0%
1.9%
1.8%
71.0%
100.0%

Share
17.7%
12.6%
9.5%
8.6%
7.0%
6.7%
3.8%
3.6%
2.0%
1.9%
31.0%
100.0%

Share
11.3%
10.9%
10.7%
8.7%
5.8%
5.5%
5.4%
5.1%
4.8%
4.2%
72.4%
100.0%

92-01 avg.
growth
22.6
29.1
6.8
12.6
10.1
12.1
6.8
21.7
12.5
17.9
13.6
92-01 avg.
growth
21.7
11.7
19.4
13.8
13.2
19.1
19.0
13.5
2.6
9.0
13.1
92-01 avg.
growth
6.6
12.5
10.8
12.9
23.1
12.6
-239.8
9.1
20.1
24.5
92-01 avg.
growth-226.1
15.0
11.4
-5.5
14.6
28.1
13.9
16.3
9.8
12.8
-

Source: “China Customs Statistics”

18

Development Bank of Japan Research Report/ No. 39

With Japan
ImportMil US$92-01 avg.
Value
Share
growth
7,462
16.6%
37.9
Electrical Machinery
6,908
15.3%
15.4
Woven apparel
4,560
10.1%
21.1
Knit apparel
3,241
7.2%
48.0
Machinery
2,008
4.5%
-0.7
Mineral fuel, oil
1,449
3.2%
26.4
Prepared meat, fish
Optic/Precision Instruments
1,352
3.0%
34.1
Other textile articles
1,163
2.6%
19.1
1,010
2.2%
20.6
Footwear
965
2.1%
4.1
Fish
30,11866.8%
sum
45,081100.0%
16.2
total
ImportElectrical Machinery
MachineryIron and steel
Precision Instruments
Plastic
Organic chemicals
Transport Equipment
Copper articles

Value
13,008
8,999
2,633
2,522
2,454
1,888
1,459
882
801
781
35,42742,805

Manmade Staple Fibers
Manmade Filament, Fabric

sum
total

Surplus
Woven apparel
Knit apparel
Mineral Fuels
Prepared meat, fish

Value

Footwear
Furniture

Vegetabls

Leather art

Fish

sum
total
Deficit
Machinery
Electrical Machinery

Iron and steel

Plastic
Organic chemicals

Optic/Precision Instruments

Copper articles
Transport Equipment

Manmade Filament, FabricManmade Staple Fibers

sum
total

92-01 avg.
growth
25.3%
15.4
17.3%
21.1
6.6%
-1.8
5.5%
26.4
4.4%
19.6
3.8%
20.9
3.5%
40.1
3.4%
10.6
3.3%
23.0
3.3%
3.1
0.0%
100.0%
-

Share
6,655
4,548
1,730
1,448
1,160
1,003
928
900
870
859
0
26,258Other textile articles

92-01 avg.
growth
30.4%
23.3
21.0%
9.8
6.2%
7.8
5.9%
18.5
5.7%
19.0
4.4%
17.3
3.4%
2.1
2.1%
22.6
1.9%
10.0
1.8%
7.6
82.8%
100.0%
13.5

Share

Value
-5,758-5,546-2,300-1,785-1,487-1,170
-859
-786
-753
-705
-21,149-23,982

92-01 avg.
growth
24.0%
4.8
23.1%
15.2
9.6%
8.4
7.4%
16.1
6.2%
19.2
4.9%
11.1
3.6%
23.5
3.3%
-4.5
3.1%
7.3
2.9%
11.2
88.2%
100.0%-

Share

drop relative to exports, indicating comparativeadvantage. The value gets closer to minus one
as exports drop relative to imports, indicatingcomparative disadvantage.

21.7% between 1993 and 2001 (13.1% of overall imports), while imports from Japan alone
expanded a strong 23.3%.
Light industrial products such as apparels
are the main categories in which China achieves
surpluses from trade, while the main categories
resulting in net imports include machinery andelectrical machinery. Raw materials such as
plastics, organic chemicals and manmade fibres
are also categories resulting in net imports.
The specialisation coefficient is an indicator of international competitiveness in categories of imports and exports. This is calculated
through dividing the trade balance by the total
value of imports and exports for each category.
The coefficient ranges between minus one andone, and the value gets closer to one as imports

Specialisation coefficient = (exports – imports) / (exports + imports)
Looking first for trade with all trade partners (Figure 1-18), the specialisation coefficientof primary products has fallen sharply frompositive to negative values since 1992, indicating a shift from competitive advantage to disadvantage. Within primary products, the leading categories are agricultural products andmineral fuels. As shown in Figure 1-19, agricultural products have maintained competitive-

0.60
0.40
0.20
0.00
-0.20
-0.40
-0.60
-0.80
92

93

94

95

96

97

Primary products

98

99

00

01

Industrial procucts

Figure 1-18. Specialisation Coefficients (Global Trade)
0.60
0.40
0.20
0.00
-0.20
-0.40
-0.60
-0.80
92

93

94

Textile goods
Chemicals/Plastics
Transport equipment

95

96

97

98

Agricultural products
Machinery

99

00

01

Mineral fuelsElectric equipment

Figure 1-19. Specialisation Coefficients (Global Trade)HS single-digit basis. HS 1-3 and 5 are primary products, HS 6-19 are industrial products.
Source: “Chinese Customs Statistics”
Note:

Development Bank of Japan Research Report/ No. 39

19trend, and these two categories are in the process of crossing over into positive territory.
Furthermore, industrial products are usually regarded as capital-intensive goods, but as
examined in detail in Chapter II, China’s electric equipment and electronics industries areengaged in processing trade. That is to say they
import components, assemble the finishedproducts, and then export them. China is thus
the site for the labour-intensive stages of production, resulting in its pattern of competitive
advantage.
Figure 1-20 shows specialisation coefficients for trade with Japan. China has relativeadvantage in primary products, but is generally

ness and stayed in positive territory. By contrast,
mineral fuels have become a category of relative disadvantage, after China switched fromcrude-oil exporter to importer from 1993 as
rapid economic growth pushed up its domestic
demand. This is the main factor behind theoverall specialisation coefficient for primary
products slipping into negative territory. On theother hand, industrial products have risen into a
position of modest relative advantage since thelate 1990s. Textile goods have maintained relative advantage since 1992, but electric equipment and machinery display a value of close to
zero. The specialisation coefficients of machinery and transportation equipment are on a rising
1.00
0.80
0.60
0.40
0.20
0.00
-0.20
-0.40
-0.60
-0.80
-1.00
92

93

94

95

96

97

Primary products

98

99

00

01

Industrial Products

Figure 1-20. Specialisation Coefficients (Trade with Japan)
1.00
0.80
0.60
0.40
0.20
0.00
-0.20
-0.40
-0.60
-0.80
-1.00
92

93

94

Textile goods
Chemicals/Plastics
Transport equipment

95

96

97

Agriculture
Machinery

98

99

00

01

Mineral fuelsElectric equipment

Figure 1-21. Specialisation Coefficients (Trade with Japan)
HS single-digit basis. HS 1-3 and 5 are primary products, HS 6-19 are industrial products.
Source: “Chinese Customs Statistics”
Note:

20

Development Bank of Japan Research Report/ No. 39

disadvantaged in industrial products. Figure
1-21 shows specialisation coefficients for individual categories of goods, showing relativeadvantage in primary products such as agricultural products and mineral fuels21, and in industrial products such as textile goods. Elsewhere,
categories of relative disadvantage include
electric
equipment,machinery,
chemicals/plastics and transportation equipment.
Nevertheless, specialisation coefficients havebeen rising rapidly in industrial products suchas electric equipment, machinery and transportation equipment since 1992.
3.2.

(Figure 1-22). To start with, both the number ofprojects and their value shot up from 1992, andthen the actually utilized value of investments
expanded up to 1998. The value then slackened
off in 1999 and 2000, but the contract value
started to expand again from 2000 in response
to WTO membership prospects. Actually usedvalue consequently exceeded its 1998 level in
2001, reaching a new record high. As a result,
China was the recipient of $46.8 billion in foreign direct investment in 2001, out of the global
total of approximately $760 billion. This gave
China the highest share among developing
countries.22
Figure 1-23 shows foreign direct investment in China broken down by country of origin. At the start of the investment boom in theearly 1990s, other ethnically Chinese territories
such as Hong Kong23 and Taiwan took theleading role and provided nearly 80% of actually utilized value. However, the investment
boom spread to other countries, and from thelate 1990s Japan, Europe, the US and South
Korea successively joined the ranks of major
investors. The high value of investment from

Foreign Direct Investment in China

As mentioned at the start of this report, Deng
Xiao-ping’s tour of the southern seaboard in
1992 marked the start of a succession of polices
including gradual approval of investment in
tertiary industries, and measures to encourage
introduction of foreign capital into interior regions. This resulted in growing recognition ofChina’s economic potential, and sparked off aboom in foreign direct investment in China

1,200(1,000)$100 million

90
80

1,000

70

800

60
50

600

40

400

30
20

200

10

0

0
90

91

Contract value

92

93

94

95

96

97

Actually Utilized Value

98

99

00

01

Number of projects (right scale)Figure 1-22. Foreign Direct Investment in China
Source: “China Statistical Yearbook 2001”

22

UNCTAD estimate.
Preferential conditions for investment in China from
Hong Kong make it likely that Chinese capital was moved
clandestinely into Hong Kong, to return to China under theguise of foreign investment.
23

21
China has become a net importer of crude oil, but it
exports crude oil to Japan under a long-term trade agreement.

Development Bank of Japan Research Report/ No. 39

21

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Others 7.0%
United States 9.5%
Europe 9.6%
Other Asia 11.9%
Japan 9.3%
Virgin Islands 10.8%
Taiwan 6.4%

Hong Kong 35.7%

92

93

94

95

96

97

98

99

00

01

Figure 1-23. National Shares of Investment in China (Actually utilised Investment Value)
Source: “China Statistical Yearbook”

80$100 million

4000

70

3500

60

3000

50

2500

40

2000

30

1500

20

1000

10

500

0

0
90

91

92

93

94

95

96

Contract value
Number of projects (right scale)

97

98

99

00

01

Actually Utilized Value

Figure 1-24. Foreign Direct Investment by Japan in China (Chinese Statistics)
Source: Ministry of Foreign Trade and Economic Cooperation materials

the Virgin Islands is probably attributable to
Taiwanese investors evading their government’s ban in high-tech investment in China.
The combined investment share of Taiwan andthe Virgin Islands was 17.2% in 2001.
Foreign direct investment from Japan
reached $4.35 billion in 2001 (9.3% of the total), making Japan the biggest investor after
Hong Kong, Taiwan (including the Virgin Islands), Europe and the US.
Figure 1-24 shows Chinese data on Japanese foreign direct investment in China, while
Figure 1-25 shows data from Ministry of Finance and Japanese international balance of
22

Development Bank of Japan Research Report/ No. 39

payments. Unlike global investment, Japanese
investment peaked in 1995. The two sets of data
have different coverage and time periods, withJapanese figures showing approximately half
the number of agreements and one-third of thevalue of Chinese figures, but their overall patterns look similar.
Figure 1-26 shows actually utilized foreign
direct investment in China broken down by industry sectors, showing that investment ismainly in manufacture (63.5% share). Figure
1-27 shows a more detailed breakdown for investment from Japan, in which the top sharesare held by electric equipment including elec-

5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

100 million yen

number of projects

4000
3500
3000
2500
2000
1500
1000
500
0

90

91

92

93

94

95

96

MOF notification value
MOF notification number of contracts

97

98

99

00

01

Balance of Payment Value

Figure 1-25. Foreign Direct Investment by Japan in China (Japanese Statistics)
Note:

Financial year-basis data for Ministry of Finance notification value and number of contracts, calendar year-basis data for Bank of Japan data.
Sources: Ministry of Finance, “Foreign Direct Investment,” and Bank of Japan, “Balance ofPayments statistics”$100 million

1,000
Contract value
Used Value
Number of projects (right scale)

25
20
15
10
5

OthersR&D

Education and culture

HealthSocial Service

Real estate

Finance

Wholesale and retailTransport and Telecom

Construction

Electricity and Water

Manufacture

Mining0Agriculture

500
450
400
350
300
250
200
150
100
50
0

Figure 1-26. Global Foreign Direct Investment in China by Industrial Sector (2001)
Source:“China Statistical Yearbook”

tronics (58.2%), followed by transportationequipment (23.0%) and chemicals (16.9%).
In global foreign direct investment by sector, real estate (11.4% share) is the mostprominent sector after manufacturing. This
presumably reflects rapidly growing investmentof overseas Chinese capital in hotels, commercial buildings and the like in places like Shanghai. In non-manufacturing sectors, Japan displays a relatively large investment in commerce,
which includes the like of convenience storesand department stores.

Development Bank of Japan Research Report/ No. 39

23tion of manufacturing companies is the largest
at a total of $305.3 billion (60.4% share), followed by real estate ($72.2 billion, 14.3%) andservices ($34.0 billion, 6.7%). On average,
71.1% of the total capitalisation of these foreign-funded enterprises in China is held by foreigners.

Figure 1-28 shows the level of capitalisation of foreign companies in China broken
down by industry sectors. Manufacturing has by
far the greatest presence, followed by real estateand services. Foreign-funded enterprises number approximately 202,000 overall, of which
70.0% are engaged in manufacture, 8.0% inservices, and 5.9% in real estate. The capitalisa$100 million

number of projects

700

60
Value
number of projects (right scale)

600
500

50
40

400

30

300

20

200

Real Estate

Service

Transportation

Finance

TradeConstruction

Fishery

MiningAgriculture

Transport

Other manu.

Electrical

Machinery

Metal

Pulp

0
Chemical

0
Food

10
Textile100

Figure 1-27. Japanese Foreign Direct Investment in China by Industrial Sector (2001)
Source: Ministry of Finance, “Foreign Direct Investment”

3,500

100 mil US$

1,000
Capital invested by Chinese partner

3,000

140

Capital invested by foreign partner

120

Number (right scale)

2,500

160

100

2,000

80

1,500

60

1,000

40

OthersR&D

Education and culture

HealthServices

Real estate

Finance

Wholesale and retailTransport and Telecom

Construction

Electricity and Water0
Manufacture0
Mining

20
Agriculture

500

Figure 1-28. Number of Foreign-funded enterprises in China, and Their Capitalisation,
by Industry Sector (2001)
Source: “China Statistical Yearbook”

24

Development Bank of Japan Research Report/ No. 39

3.3.

the 1990s. The overall current account balance
including these items was in the black by $17.4
billion in 2001, as surpluses in goods andtransfers more than compensated for deficits inservices and income.
The capital account surplus expanded in
the early 1990s due to steep expansion in incoming direct investment, but then contracted
in the late 1990s due to a growing deficit in areas like securities investment. The capital account went temporarily into the red in 1998 as
capital was pulled out of China as a result of the
Asian currency crisis, but it had recovered to alarge surplus in 2001.

International Balance of Payments andExchange Rate Policy

The international balance of payments data in
Table 1-8 and Figure 1-29 illustrate trends intrade and foreign direct investment discussed
above.
The trade balance has broadly stayed in theblack over the past ten years, as mentioned earlier. The balance on services such as transportation and insurance is in the red. The balance on
income also remains in the red, but we attribute
this to expanding payments of returns on cumulative direct investment from abroad during

Table 1-8. China’s International Balance of Payments (2001)($100 million)
174
Goods & Services
281
Trade Balance
340
Services-59
Income-192
Current Transfers
85
Capital Account348
Direct Investment
374
Portfolio Envestment-194
Other Investment
169
Net Errors and Omissions-49
Reserves and Related Items
473
Current AccountSource: IMF, “International Financial Statistics”

1000
800
600
400
200
0
-200
-400
-600
-800
-1000

$100 million

90

91

92

93

94

Trade Balance
Direct Investment
Net Errors and Omissions

95

96

97

98

99

00

01

Services ＆ Income
Other Investment
Overall Balance

Figure 1-29. China’s International Balance of Payments
Source: IMF, “International Financial Statistics”

Development Bank of Japan Research Report/ No. 39

25

with the market rate. China officially uses a
managed floating system to regulate exchange
rates, where variation from the previous day’s
rate is permitted within a range. In reality,
however, free movement of capital is not permitted in China, and the exchange rate has been
pegged at approximately RMB8.3/$ since themiddle of the 1990s, through intervention by
the Peoples Bank of China (Figure 1-30). The
exchange rate against the yen reflects the dollar/yen rate, and is currently roughly

China’s international balance of payment
contains large errors and omissions, whichshows deficit of $22.1 billion in 1997 shrank to$4.9 billion in 2001. The main sources of errors
and omissions probably include capital flight24
carried out wealthy Chinese individuals andcorporations.
Turning to China’s foreign exchange policy, China used to have official and market
rates up to 1993, but then lowered its official
rate by around 30% against the dollar unifying

yen/yuanyuan/US$

10
9
8
7
6
5
4
3
2
1
0

0
5
10
15
20
25
30
35

90

91

92

93

94

95

RMB/US$ rate

（備考）中国統計年鑑より作成。

96

97

98

99

00

01

yen/RMB rate (right scale）

Figure 1-30. Exchange Rate
Note:
Dollar/yen rate can be calculated from dollar/RMB and RMB/yen rates.
Source: “China Statistical Yearbook”

2,500$100 million

2,000
1,500
1,000
500
0
90

91

92

93

94

95

National Government Debt
Foreign Reserves

96

97

98

99

00

01

Private Sector's Debt

Figure 1-31. Foreign Reserves and Foreign Debt
Note:

Outstanding government debt before 1995 is calculated from bond issuance and redemption.
Source: “China Statistical Yearbook”
24

This probably includes capital transferred clandestinely to Hong Kong, as mentioned previously.
26

Development Bank of Japan Research Report/ No. 39¥14-15/RMB.
China is thus maintaining surpluses in its
current and its capital accounts, so its foreign
reserves are accumulating (Figure 1-31). At theend of 2001, China’s foreign reserves weresecond only to Japan ($402.0 billion) at $212.2
billion, and in recent years the level has been
fully sufficient to cover outstanding foreign
debt in both the public and private sectors. We
judge that this accumulation of foreign reservesindicates that the RMB is under-valued at its
current pegged exchange rate.

4.

Changes in Industrial Structure
4.1.

GDP by Industry

China’s economic development does not simply
consist of GDP expansion; China’s industrial
structure is also changing. We will examinesuch structural changes with reference to industrial categories as shown in Table 1-9.
Figure 1-32 shows real GDP performanceby types of industry in the 1990s. In the nine
years of accelerated reform and liberalisation
between 1993 and 2001, primary industry re-Table 1-9. Industrial Categories
Large Groups
Primary Industry
Secondary Industry

Medium Groups

Small Groups

MiningIndustry

Light Industry

Materials,
EnergyProcessing
Industry

Construction
Tertiary Industry

30 Industries
Agriculture
Coal Mining
Crude oil and natural gas
Metal ore mining
Non-metal ore mining
Food products
Textile goods
Wearing apparel and leather
Sawmills and furniture
Paper and productsElectricity and hot water
Petroleum processing
Coal processing and products
Chemicals
Non-metal mineral products
Metals smelting and products
Metal products
Machinery and equipments
Transport equipment
Electric equipment
Electronic equipment
Instruments and meters
Maintenance and repair
Other manufacturing products
Construction
Transport and communication
Commerce and restaurants
Social services
Finance and insurances
Public administration

Source: The 30 categories shown above are taken from “Sector Analysis of Chinese Economic Development, & New Input-Output Rankings Using Comparable Prices.”

Development Bank of Japan Research Report/ No. 39

27

10

trillion yuan

9
8

16%

120%

14%

100%

12%

7
6

10%

5
4

8%
6%

3

4%

2
1
0

60%
40%
20%

2%

0%

0%

-20%

90 91 92 93 94 95 96 97 98 99 00 01
Primary Industry
Secondary Industry（Construction）
Growth rate(right scale)
15%
10%

80%

90 91 92 93 94 95 96 97 98 99 00 01
Secondary Industry（Mining）
Tertiary Industry

20.0%

Figure 1-32. Real GDP Broken Down
by Type of Industry (1995 Prices)

Figure 1-33. Real GDP Contribution Rateby Type of Industry

Note:
Converted into real terms using GDP deflator.
Sources: “China Statistical Yearbook 2001,” and IMF, “International Financial Statistics”

corded expansion of 60% (average annual
growth rate of 5.2%). Secondary and tertiaryindustries expanded faster than this in the same
period, recording growth of 160% (annual average of 11.3%) and 120% (annual average of9.2%) respectively.
Contribution rates shown in Figure 1-33
demonstrate that secondary industry (with mining and manufacturing playing the leading role),
provided an average of around 57% of overall
economic expansion in the same nine-year period. The average contribution rate from tertiaryindustry was 33% over the whole period, although this rises to 42% in the period from1997. By contrast, primary industry only madean average contribution of 10% over thenine-year period.
The relative weightings of primary, secondary and tertiary industries within GDPchanged from 22:44:34 in 1992 to 15:51:34 in
2001. This suggests a picture of rapid industrialisation, as decline in the weighting of primaryindustry more or less exactly matched expansion in the weighting of secondary industry.

28

Development Bank of Japan Research Report/ No. 39

Moreover, the Chinese government’s tenth
five-year plan running from 2001 to 2005 targets an industrial structure ratio of 13:51:36 in
2005, so the weighting of service industries islikely to rise. The industrial structure ratio forJapan in 1999 based on real GDP25 was 1:29:70.
Looking back at Japan’s economic history since
the Second World War, the structural changes
undergone by in the Chinese economy during
the 1990s are rivalled by Japan in its period of
rapid growth between 1960 (11:48:41) and1970 (5:56:39).
In Table 1-10 we have analysed26 growth
factors for each type of industry, using real
GDP growth (∆Y/Y), employment growth(∆L/L), and growth in labour productivity(∆[Y/L]/[Y/L]). The number of people employed in primary industry stayed unchanged

25
Calculated from nominal values for 1999 in the SNA
Input-Output Table.
26
If GDP is Y and the number of people in employment
is L, labour productivity is Y/L. These two share a growth
relationship of ∆Y/Y = ∆L/L + ∆(Y/L)/(Y/L).

Table 1-10. GDP and Labour Productivity by Type of Industry
1992
Real GDP(bl yuan)

4,140
901
1,818

9,336
1,422
4,775

92-01
average growth
growth rate
9.5%
5.2%
11.3%

1,420
65,55438,34914,226

3,139
73,02536,513
16,284

9.2%
1.2%
-0.5%
1.5%

2.2
1.1
1.0
1.1

Primary Industry
Secondary Industry

12,9796,316
2,351
12,782

20,22812,784
3,894
29,324

5.1%
8.1%
5.8%
9.7%

1.6
2.0
1.7
2.3

Tertiary Industry

10,944

15,5174.0%

1.4

Primary Industry
Secondary Industry
Tertiary Industry

Employed (10,000)(10,000 persons)Primary Industry
Secondary Industry
Tertiary Industry

Labour productivity(yuan/person)

2001

01/92
ratio
2.3
1.6
2.6

Table 1-11. Economic Indicators by Region (2001)
GDP (100 Mil US$）Primary
Secondary
Industry
Industry

Employed（10 thou.）Primary Secondary Tertiary
Industry
Industry
Industry

Tertiary
Industry(Share ％)(Share ％)29,87824,80623,935

10,064(Average=100)

Coastal Region

61,393
(64)

(7)

(31)

(26)

(33)

(14)

(9)

(10)

(195)

(51)

(345)

(260)

Centre Region

27,125

4,998

12,547

9,580

20,832

11,744

3,646

5,441

13,021

4,256

34,40817,606

(28)

(5)

(13)

(10)

(29)

(16)

(5)

(7)

(99)

(32)

(262)

(134)

West Region

18,248

383

7,431

6,985

18,286

11,166

2,355

4,766

9,979

3,433

31,557

14,655

(19)

(0)

(8)

(7)

(25)

(15)

(3)

(7)

(76)

(26)

(240)

(112)

95,933

14,61049,06932,25473,02536,513

16,284

20,22813,137

4,001

30,133

15,945

(100)

(15)

(51)

(34)

(100)

(50)

(22)

(28)

(100)

(30)

(229)

(121)

National Total

6,710

Labour productivity(yuan／person）
Primary Secondary Tertiary
Average
Industry
Industry
Industry

6,600

7,271

25,6506,667

45,267

34,118

Note: The cumulative total of the three regions differs from the national figure.
Source: “China Statistical Yearbook 2001”

between 1992 and 2001, while those employed
in secondary industry rose 10%, and those employed in tertiary industry rose 60%. Over thesame period, labour productivity expanded 70%
in primary industry, 130% in secondary industry and 40% in tertiary industry, so secondary
industry made much more rapid progress thanthe other two types. In other words, greater labour productivity played a major part in overall
expansion of secondary industry, while in tertiary industry employment of more people played
a greater role than growth in labour productivity.
The strong rise of labour productivity in secon-

dary industry looks likely to have reflected
rapid introduction of foreign capital. On theother hand, the labour productivity of primaryindustry is markedly low, raising concerns overeffects from China’s WTO membership going
forward.
We mentioned the regional imbalances
within China earlier in this report, and it is instructive that the coastal region has a highweighting of people employed in secondary
industry boasting high labour productivity. By
contrast, the central and western regions havehigh weightings in primary industry (Table

Development Bank of Japan Research Report/ No. 3929

1-11). It appears that this difference in industrial distribution is a factor behind regional imbalance in growth rates.
4.2.

Production by Industry

Table 1-12 shows shares of GDP (value-added)
and production (value-added + intermediate
input) by type of industry, based on the latest
input-output table currently available (1997)27.
This shows that secondary industry provides
52.1% of GDP and 66.2% of production, withthe largest part of this coming from manufacturing at shares of 40.8% and 54.1% respectively. Secondary industry’s share of production
is higher in GDP than in production because
China’s secondary industry requires a highlevel of intermediate input.
Figure 1-34 presents a closer look, showing that chemicals provides the largest share ofdomestic production value within secondary
industry, and 7.6% of overall production. Following chemicals, the sectors with the highest
shares in overall production are food products(6.9%), textile goods (4.6%), non-metal mineralproducts (4.4%), and machinery (4.1%).
We next examined inducement of eachindustry’s production value according to thefinal demand sectors of domestic demand, exports and imports (imports are displayed as
negative values). We define domestic production value thus:
Domestic production value = production
value induced by domestic demand + production value induced by exports + (negative) production value induced by imports
Export demand induces a large volume of
production in textile goods, and wearing apparel and leather. The materials and energy, andprocessing and assembly segments enjoy strong
production inducement from exports as well,
but their negative inducement from imports is
also strong. Traditional industries like textile
goods, wearing apparel and leather have an established presence as important export industries displaying developed production bases andgood availability of raw materials within China.
On the other hand, the materials and energy,
and processing and assembly segments do nothave sufficient domestic supply bases, and they
are therefore forced to rely on imports fromforeign countries.

Table 1-12. Shares of GDP and Production by Type of Industry (1997; Nominal)
Share of GDP
Primary Industry
Secondary Industry

19.5%

12.3%

52.1%

66.2%

Mining

4.7%

3.4%

Industry

40.8%

54.1%

Light Industry
Materials, energy
Processing Industry
Construction

11.8%
16.2%
12.7%
6.6%

15.7%
24.2%
14.2%
8.7%

28.5%

21.4%

Tertiary Industry
Source: “China Input-Output Table 1997”

27
China compiles its inter-industry relations table every
five years, in years ending in 2 and 7, with continuation
data issued in intervening periods. The Input-Output Tablefor 2000 is currently being prepared for scheduled publication during 2003.

30

Share of Production

Development Bank of Japan Research Report/ No. 39

RMB billion

3000

Domestic Demand
Exports

2500

Imports
Domestic Production Value

2000
1500
1000
500
0

Light Industry(weight; 15.7%)

Materials,energy(24.2%)

Public administration

Social srevices

Finance and insurances

Commerce and restaurants

Construction

Transport and communication

Other manufacturing products

Instruments and meters

Maintenance and repair

Electric equipment

Electronic equipment

Transport equipment

Machinery

Metal products

Non-metal mineral products

Metals smelting and products

ChemicalsPetroleum processing

Coal processing and productsElectricity and hot water

Paper and products

Sawmills and furniture

Textile goods

Wearing apparel and leather

Food products

Metal ore mining

Non-metal ore mining

Coal Mining

Crude oil and natural gas

Agriculture

-500
-1000

Processing Industry(14.2%)

Figure 1-34. Domestic Production Value by Industry Sector, and Production Inducement Valueby Demand Sector (1997)
Source: “China Input-Output Table 1997”

4.3.

Analysis of Production Inducement
Factors (Silkin Analysis)

Figure 1-35 shows expansion in nominal production value for each industrial sector between
1990 and 1997. Secondary industry as a wholeachieved growth of 25.4% during this period.
Within secondary industry, all categories
achieved high expansion with light industry at
24.0%, materials and energy at 24.7%, andprocessing and assembly at 27.6%. Within individual sectors, extremely high growth rates
were recorded by traditional industries such as
wearing apparel and leather (31.6%), and sawmills and furniture (31.7%); and cutting-edge
industries such as transportation equipment (including bicycles and motorbikes) (34.6%),
electronic equipment (32.6%), and electric
equipment (28.5%).
Figure 1-36 examines the demand factors
responsible for production growth in each industry. The figures are derived from Silkin
analysis, which is a way of determining demand

factors behind production growth, based on thefollowing formula:
Domestic production growth = domestic
final demand factors + export expansion factors+ import replacement factors + technologicalinnovation factors
Examination of real production growth
between 1990 and 199528 indicates that production inducement by exports was instrumental inindustries including textiles, textile/leather
goods, chemicals, machinery and electronics.
On the other hand, industries where domestic
demand was the main inducement factor include agriculture/forestry/fisheries, foods andconstruction. Technological innovation is indicated by changes of input coefficient in the
input-output table, but this factor had little visible impact on production since the period covered is only five years. Only in chemicals
28

According to Sector Analysis of Chinese Economic
Development, & New Input-Output Rankings Using
Comparable Prices.

Development Bank of Japan Research Report/ No. 39

31

Agriculture

32

Development Bank of Japan Research Report/ No. 39
Electric equipment

Public administration

Finance and insurances

Construction

Other manufacturing products

Maintenance and repair

Instruments and meters

Electronic equipment

Electric equipment

Transport equipment

Machinery

Metal products

Metals smelting and products

Non-metal mineral products

Chemicals

Coal processing and products

Petroleum processing

Electricity and hot water

Paper and products

Sawmills and furniture

Wearing apparel and leather

Textile goods

Food products

Non-metal ore mining

Metal ore mining

Crude oil and natural gas

Coal Mining

Public administration

Finance and insurances

Social srevices

Commerce and restaurants

Transport and communication

軽工業
素材・
ｴﾈﾙｷﾞｰSocial srevices

Commerce and restaurants

Transport and communication

Construction

Other manufacturing products

Maintenance and repair

Instruments and meters

Electronic equipment

Materials,energy(average 24.7%)

Transport equipment

Machinery and equipments

Metal products

Metals smelting and products

Non-metal mineral products

Chemicals

Coal processing and productsLight Industry(average 24.0%)

Petroleum processing

Electricity and hot water

Paper and products

Sawmills and furniture

Wearing apparel and leather

500

Textile goods

600

Food products

700

Non-metal ore mining

Metal ore mining

Crude oil and natural gas

800
Agriculture

15%

Coal Mining

35%
90-97 nominal

30%

25%

20%

Processing Industry(average 27.6%)

Figure 1-35. Domestic Production Expansion by Industry Category (Average Annual Rates)

Sources: “China Input-Output Table 1997,” “Sector Analysis of Chinese Economic Development,” and “New Input-Output Rankings Using Comparable Prices”

billion yuan
Technological innovation factors
Import replacement factors
Exports factor
Domestic Demand factor
Production value change

400

300

200

100

-100
0

Figure 1-36. Analysis of Production Inducement Factors (Silkin analysis; 1990-1995)

Sources: “Sector Analysis of Chinese Economic Development,” and “New Input-Output Rankings Using Comparable
Prices”

manufacturing did technological innovation
noticeably stimulate production growth. This
probably reflects factors like replacement of
natural fibres with chemical fibres, and theswitch to production using industrial machinery,
resulting in greater consumption of plastics.
4.4.

Analysis of Self-Sufficiency Rates(Skyline Analysis)

We next examine self-sufficiency rates for Chinese industries using skyline graphs. These baseproduction inducement stemming from domestic demand factors at 100. Values over 100
represent that of exports, and the dark-shaded
sections represent that of imports. The
self-sufficiency rate for each industry is thus
represented by the height of the light-shaded
section. Furthermore, the width of the columns
is proportionate to each industry’s production
value.29
Figure 1-37 is a skyline graph for China in
1997. Light industrial sectors including textile
goods and wearing apparel and leather, as wellas electronic equipment and instruments andmeters show a high weighting of production
induced by export demand. These two groups
of industries both tower above the rest of thegraph. Sectors such as textile goods and wearing apparel and leather display greater export-induced production than import-induced
production, which results in high self-sufficiency
rates. These industries are major earners of foreign currency through trade.
By contrast, sectors within the materials
and energy, and the processing and assembly
segments display high weightings of imports(negative production inducement), and theirself-sufficiency rates consequently only exceed
100% by a little. This situation greatly differsfrom the picture for light industry.30
29
See the appendix at the end of this report for details oninterpretation of skyline graphs.
30
The trade balance for chemicals is in the red, but the
skyline graph shows a self-sufficiency rate of close to100%. This results from the graph using production value
including intermediate input. In other words, the productsof the chemicals industry are used for intermediate input
in, for example, home appliances, and are then exported
embodied in home appliances. The skyline graph includes
these exports via other industries within production in-

Structural changes in Chinese industry canbe traced by comparing the skyline graphs of1990 (Figure 1-38) with 1997. While they showsame two clusters of sectors protruding at the top,significant changes between the two include: 1) agreater 1997 weighting of production inducement from exports and imports in textile goods,
electric equipment, and electronics; 2) the
self-sufficiency rates in electric and electronicequipments rise from less than 100% in 1990 toover 100% in 1997, with significant expansion in
their shares of overall industrial production; 3) a
sharply higher weighting of production inducement from exports in tertiary industry such ascommerce and restaurants, indicating stimulationof commercial activities through trade.
We believe comparison with Japan’s skyline graph is useful for understanding China’s
industrial structure. For this purpose we haveprovided Japan’s graph for 1960 (Figure 1-39),
from the period of rapid economic growth,
1980 (Figure 1-40), when an industrial structure
dependent on foreign demand was clearly inevidence, and 1995 (Figure 1-41).
1960 marked the start of a period of rapid
economic growth, and at this time light industries such as textile goods, wearing apparel andleather, had a high weighting of production inducement from exports, and self-sufficiency
rates well in excess of 100%. This pattern issimilar to the China of today. The other common feature is high levels of production inducement from exports in sectors within processing and assembly, such as transportationequipment, electric and electronic equipments.31
The Japanese economy subsequently developed
towards a complete presence in all types of industry, with establishment of a foreign demand-dependent structure in the 1970s and1980s, and rising self-sufficiency rates inmanufacturing. Dependence on foreign demand
is now gradually lessening, following the periodof steep yen appreciation in the late 1980s.

ducement from exports for the chemicals industry, whichmeans the self-sufficiency rate produces a different result
to trade statistics.
31
The electronics industry was in its development stage
in 1960, and its production value did not have a significant
weighting in the overall economy.
Development Bank of Japan Research Report/ No. 39

33

Sources:

34←light industry(15.8%)→

Paper and products

Development Bank of Japan Research Report/ No. 39←---materilas, energy(23.5%)----→

Metal products

Public administration

Finance and insurances

Social srevices

Commerce and restaurants

Transport andcommunication

Construction

Other manufacturing

Electric equipment
Electronic equipment

Transport equipment

Machinery and equipments←---materials, energy(24.6%)----→

Metals smelting andproducts

Non-metal mineral products

ChemicalsElectricity and hot water
Petroleum processing←light industry(15.3%)→

Wearing apparel and leather

Textile goods

Source:Food products

Agriculture

Public administration

Finance and insurances

Social srevices

Commerce and restaurants

Transport andcommunication

Construction

Other manufacturing

Electronic equipment

Electric equipment

Transport equipment

Machinery and equipments

Metal products

Metals smelting andproducts

Non-metal mineral products

ChemicalsPetroleum processing

Electricity and hot water

Paper and products

Wearing apparel and leather

Textile goods

Food products

Agriculture

Self supply ratio (%)
150

100

50

←-----------------------------Secondary industry(66.4%)-----------------------------→←processing industry(14.2%)→

Figure 1-37. Skyline Graph for China (1997; Nominal)“China Input-Output Table 1997”

Self supply ratio (%)

150

100

50

←-------------------------Secondary industry(61.6%)-------------------------→←processing industry(11.7%)→

Figure 1-38. Skyline Graph for China (1990; Nominal)“Sector Analysis of Chinese Economic Development,” and “New Input-Output Rankings Using
Comparable Prices”

light industry

materials, energy(15.2%)

Public administration

Finance and insurances

Social srevices

Commerce and restaurants

Transport andcommunication

Construction

Electric equipment
Electronic equipment

Transport equipment

Machinery and equipments

Metal products

Metals smelting andChemicalsElectricity and hot water

Paper and products

Textile goods

Food products

Agriculture

Public administration

Finance and insurances

Social srevices

Commerce and restaurants

Transport andcommunication

Construction

Other manufacturing

Electric equipment

Transport equipment

Machinery and equipments

Metal products

Non-metal products
Metals smelting andproducts

ChemicalsElectricity and hot water
Petroleum processing

Paper and products

Wearing apparel and leather

Food products
Textile goods

Agriculture

Self supply ratio (%)
150

100

50

light industry
processing
materials, energy (15.9%)(17.8%)
industry (9.7%)←-------------------- Secondary industry (52.6%) ---------------------→

Figure 1-39. Skyline Graph for Japan (1960; Nominal)

Source: Ministry of Public Management, Home Affairs, Posts and Telecommunications, “Input-Output Tables”

Self supply ratio (%)

150

100

50

←--------------------- Secondary industry (66.4%) ---------------------→

processing industry(15.4%)

Figure 1-40. Skyline Graph for Japan (1980; Nominal)

Source: Ministry of Public Management, Home Affairs, Posts and Telecommunications, “Input-Output Tables”

Development Bank of Japan Research Report/ No. 39

35

Self supply ratio (%)
150

100

Public administration

Finance and insurances

Social srevices

Commerce and restaurants

Transport andcommunication

Construction

Electric equipment

Electronic equipment

Transport equipment

Machinery and equipments

Chemicals

Non-metal mineral products
Metals smelting andproducts
Metal productsElectricity, hot water
Petroleum processing

Food products

Textile goods / Wearing
apparel and leather
Paper and products

Agriculture

50

light
processing industry
materials, energy (15.2%)
industry(15.4%)←------------------Secondary industry (46.7%)------------------→

Figure 1-41. Skyline Graph for Japan (1995; Nominal)
Source: Ministry of Public Management, Home Affairs, Posts and Telecommunications, “Input-Output Tables”

The salient features of the Japanese economy in 1995 were low self-sufficiency rates in.
agriculture, oil and minerals, countered by highself-sufficiency rates in manufacturing sectors
like transportation equipment, machinery andelectric and electronics equipments. The skyline
chart for 1995 consequently exhibits a broad
and tall central segment.
Some observers have suggested that China
today resembles Japan in the 1960s.32 The relevant skyline graphs certainly show that like
China today, Japan in the 1960s was shiftingfrom traditional export-based industries liketextiles towards cutting-edge industries such asmachinery.
Closer examination, however, shows that
China differs from Japan in the 1960s in its
32
For example, a Nihon Keizai Shimbun report of January 13, 2002, pointed out the similarity with Japan in theearly 1960s of China’s current per capita GDP, average
lifespan, infant mortality rate, Engel’s coefficient, and per
capita annual electricity consumption volume.

36

Development Bank of Japan Research Report/ No. 39

high weighting of production inducement fromexports in textiles and machinery (in otherwords, higher columns in the skyline graph),and in machinery in particular its large volumeof negative production inducement from imports (the dark-shaded part of the skyline graph),in addition to the large volume from exports.
Another discrepancy is China’s relatively
high weightings in primary and secondary industries, and rather low weighting in tertiaryindustry.33 The large presence of secondary industry in China probably reflects the emphasis
on industrialisation of previous economic plans,
and the fact that China’s opening up to the outside world focused on secondary industry. Furthermore, the high weighting of primary industry is probably attributable to factors including:
1) China’s strong protectionism towards agri33

However, it should be remembered that corporationsin China also provide education and medical services for
local residents and employees, and little of this is recorded
in statistics as tertiary industry activities.

cultural products up to its WTO membership inDecember 2001; 2) workers in rural areas being
forced to stay in agriculture through the hukou
system and other measures, despite the rapid
industrialisation taking place in the coastal region.
Although China’s industrial structure resembles Japan in the 1960s in some respects,
China’s high dependence on imports in sectors
driving economic development like textiles,
electric equipment and electronics is in contrast

to the self-sufficient structure that the Japanese
economy was once heading towards. We attribute this to China’s development resulting from
activity of foreign capital, and expansion of
trade while building up of close relationships
based on division of labour with neighbouring
countries such as Japan. In the following chapter we attempt to assess the contribution of foreign-funded enterprises to China’s economic
development using a range of statistics.

Development Bank of Japan Research Report/ No. 39

37

II The Role of Foreign-FundedEnterprises and Problems ofState-Owned Enterprises
1. The Dual Structure of
Foreign-Funded Enterprises andState-Owned Enterprises
In Chapter II we look at areas where China’s
economic development has benefited greatly
from foreign direct investment, focusing on theactivities of foreign-funded enterprises (FFEs).
Foreign direct investment does not merely
involve introduction of foreign capital and facilities, but comprehensive introduction of production technology, production systems andbusiness expertise, and at times even the complete transplantation of alien business models.
Such introduction of production system andbusiness expertise affects operations at existing
rival corporations, and is likely to have theside-effect of driving up overall economic efficiency.
State-owned enterprises (SOEs) were for along time the main providers of goods and services in China, under the direct control of thegovernment. The operating principles, ethos,and other aspects of these SOEs are consequently radically different from FFEs run on
capitalist principles, and even today the twogroups co-exist as separate entities within the
Chinese economy. A dual structure has clearly
emerged as advanced, efficient FFEs have rapidly expanded their share of production, while
backward and inefficient SOEs have declined atincreasing speed. Comparing production efficiency by means of labour productivity 34, theperformance of FFEs at RMB71,403 per person
is roughly twice as good as SOEs with
RMB36,681 per person. This illustrates thewide gulf between FFEs and the rest of theeconomy including SOEs.35

Among theories of economic development,
dualism attempts to explain the pattern andcourse of per capita income expansion in an
economy with both modern (industrial) and traditional (agricultural) sectors. We suggest thatthe rapid introduction of foreign capital in
China has resulted in a similar dual structure
within secondary industry.
This report will not go so far as to consider
what dualism can tell us about China’s courseof economic development in recent years, butwill merely confirm the existence of a dual
structure composed of FFEs and SOEs within
secondary industry in China. We summarise
trends among FFEs, and consider the salientfeatures of China’s economic development.
2.

The Role of Foreign-Funded Enterprises
2.1.

The Role of Foreign-FundedEnterprises in Production

The rapid expansion of foreign direct investment in China since 1992 has resulted in sharp
growth in production by foreign-funded enterprises (FFEs). Chinese statistics divide enterprises into state-owned enterprises (SOEs), collective-owned enterprises, joint-venture enterprises, private enterprises, FFEs, and others.
SOEs are enterprises whose assets are ownedby the state; collective-owned enterprises areenterprises whose assets belong to state collectives. Village enterprises are included within
this collective-owned enterprises. FFEs are enterprises with registered foreign ownership, andthis includes joint ventures, collaborations and100% foreign-owned enterprises.36

34

Defining labour productivity as manufacturing
value-added / number of employees (China Industrial
Statistics Yearbook).
35
The average labour productivity figure of RMB45,679
should be treated with caution because of this gulf between foreign -funded enterprises and state-owned enterprises. The average labour productivity figure for all industries and enterprises including non-manufacturing andmedium and small enterprises is even lower at
38

Development Bank of Japan Research Report/ No. 39

RMB12,565, demonstrating the very low labour productivity among enterprises not included in manufacturing
statistics.
36
As defined by the China Statistical Yearbook.

Figure 2-1 shows mining and manufacturing production in each of the above categories
of enterprise, with FFEs steadily expanding
their share of production in the late 1990s.
Other categories including private enterprises
and joint-venture enterprises also achieved
similar expansion in production value.37 By
contrast, SOEs and collective-owned enterprises failed to expand production value in thelate 1990s, pushing down their share of overall
production.
Table 2-1 shows the shares commanded by
FFEs within mining and manufacturing production, which were 27.4% of production value and24.0% of value-added in 2000. FFEs are thus
responsible for around one-quarter of China’s
production. In these statistics which cover
SOEs and non-SOEs with annual sales of atleast RMB5 million, the share of FFEs exceedsthat of SOEs.

16

Figure 2-2 present a breakdown of mining
and manufacturing production by FFEs. Processing and assembly has the largest weighting(47%), followed by materials and energy (31%),
and then light industry (22%). SOEs and other
non-FFEs display a weighting in light industry(20%) that is very similar to FFEs, but a relatively low weighting in processing and assembly, and relatively high weightings in both materials and energy, and mining. This illustrates
the structural difference between FFEs andnon-FFEs provision of strong incentives for
FFEs to enter the processing and assembly sector, with the aim of obtaining foreign currency
through exporting. The entry of FFEs the energy and materials sector has been lukewarm bycomparison, reflecting government protectionof domestic industries.

%

RMB
trillion
非国有企業は年間売上500万元以上の企業が対象。

60

14

50

12
40

10

30

8
6

20

4
10

2
0

0
90

91

92

93

94

State-owned
PrivateOthersShare of Foreign

95

96

97

98

99

Collective-owned
Other incl foreign(-94)
Foreign
Share of State-owned

Figure 2-1. Mining and Manufacturing Production by Enterprise Category
Notes:
Source:1. Data up to 1994 did not distinguish between joint-venture enterprises and foreign-funded enterprises.
2. Includes non-state-owned enterprises with annual sales of less than RMB5 million.
“China Statistical Yearbook”

37
The new emergence of private and joint-stock enterprises is a significant development, but this report will
focus on foreign -funded enterprises.

Development Bank of Japan Research Report/ No. 39

39

Table 2-1. Foreign-funded enterprises’ Share of Mining and Manufacturing Production (2000)
Gross Industrial production(RMB100 million)

Industrial value-added(RMB100 million)

ShareState-owned

Share

20,156

23.5%

7,213

Collective-owned

11,908

13.9%

3,072

Share

10,090

11.8%

3,584

Labour product ivity(yuan/ person)

Number of employed (10,000)
Share

28.4%

1,966

35.4%

36,681

12.1%

863

15.5%

35,581

14.1%

400

7.2%

89,640Private

5,220

6.1%

1,318

5.2%

346

6.2%

38,060Foreign

23,465

27.4%

6,090

24.0%

853

15.3%

71,403

Others

14,834

17.3%

4,117

16.2%

1,131

20.3%

36,420(large scale) Total

85,674100.0%

25,395100.0%

5,559

100.0%

45,679

Total

-

-

39,570----GDP base--

89,403-

71,150-12,565

Notes: 1. Includes state-owned enterprises and non-state-owned enterprises with annual sales of at least RMB5 million.
2. State-owned holding companies are included in others instead of state-owned enterprises.
3. Labour productivity is defined as manufacturing value-added / number of employees.
Source: “China Industrial and Economic Statistical Yearbook”

Foreign Funded Enterprises

Light Industry

Non-Foreign Funded Enterprises
Processing
Industry

Processing
Industry

Materials, energy

MiningLight
Industry

Materials, energy

Figure 2-2. Mining and Manufacturing Production Weightings for Foreign and
Non-Foreign-funded enterprises
Note: Includes state-owned enterprises, and non-state-owned enterprises with annual sales of at least RMB5 million.
Source: “China Statistics Yearbook”

Figure 2-3 shows production value for
FFEs and non-FFEs in individual industries.
FFEs display a high weighting in processing
and assembly industries, providing over 40% of
overall production. FFEs’ share of electronicequipment is particularly high at 71.6%. Outside of processing and assembly industries,
FFEs also command a high share of wearing

40

Development Bank of Japan Research Report/ No. 39

apparel production at 51.5%. These are sectorsthat recorded rapidly expanding production in
the 1990s (see Figure 1-35), and they are also
the sectors that constitute the two spikes in the
skyline graph (see Figure 1-37). We consequently judge that FFEs have played an extremely large and important role in improvement achieved in China’s industrial structure.

12,000

100 million yuan

80%
70%

10,000

60%
8,000

50%

6,000

40%
30%

4,000

20%
2,000

FFEs

Non-FFEs

Other manufacturing

Instruments and meters

Electronic equipment

Electric equipment

MachineryTransport equipment

Metal products

Non-metal mineral

ChemicalsPetroleum processing

Electricity and hot water

Sawmills and furniture

Textile goods

Wearing apparel

Paper and products

Materials,energy(19.7%)

Light Industry(28.7%)

Metal smelting and products

Mining(Foreign corporations' share
0.6%)

Food products

Non-metal ore mining

Metal ore mining

Crude oil and natural gas

Coal Mining

0

10%
0%

Processing Industry(42.8%)

Share of foreign

Figure 2-3. Foreign and Non-Foreign-funded enterprises’ Shares of Mining andManufacturing Production (2000)
Notes:
Source2.2.

1. Includes state-owned enterprises, and non-state-owned enterprises with annual sales of at least RMB5 million.
2. Totals do not tally due to statistical inaccuracies.
“China Statistical Yearbook”

The Role of Foreign-Funded Enterprises in Fixed Asset Investment

Investment in fixed assets supports expansionof production. We examine the investment byforeign-funded enterprises (FFEs) with reference to foreign direct investment.
Figure 2-4 shows fixed asset investment in
China. It reveals that fixed asset investment
increased rapidly from 1992. Within this, investment in capital construction and innovation,
which make up fixed asset investment, displayed strong real growth rates in excess of
30% in both 1992 and 1993.
Figure 2-5 shows fixed asset investment
broken down by type of investor. The share ofinvestment by FFEs rose rapidly from 1993
along with expansion in foreign direct investment, peaking in 1996 at 11.8%. This has diminished in recent years with petering out of
the boom in direct investment, but the share hasremained considerable at 8.5% in 2001.

Figure 2-6 shows that China’s stock of
fixed asset has grown rapidly, accompanying
the acceleration in formation of fixed capital.
According to Chinese statistics, the fixed-asset
stock (market price-basis, as henceforth) of themining and manufacturing sector expanded at areal average annual rate of 11.2% between 1992
and 2000, reaching RMB5,280 billion in 2000.
The individual industries with largest shares areelectricity and hot water (22.2%), chemicals(12.3%), and metals smelting. (10.5%).
FFEs’ share of capital stock in mining andmanufacturing industry is close to one-fifth at
18.8%, reflecting growing investment by FFEs,
and putting them second only to state-owned
enterprises (SOEs) at 40.7% (Figure 2-7).
Within individual sectors, FFEs have outstanding shares in wearing apparel and leather(64.0%) and electronic equipment (55.7%).
These are industries in which FFEs also command high shares of production.

Development Bank of Japan Research Report/ No. 39

41

4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

%
35

RMB trillion

30
25
20
15
10
5
0
90

91

92

93

94

95

96

97

98

99

00

01

Real Estate Development and Others
Investment in Innovation
Investment in Capital Construction
Growth (excl. Estate, Real, right scale)Figure 2-4. Investment in Fixed Asset (with Sub-Categories)
All industries-basis, includes real estate investment.
Converted into real terms using GDP deflator.
Source: “China Statistical Yearbook”

Note:

4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

RMB trillion

90

91

80%
70%
60%
50%
40%
30%
20%
10%
0%
92

93

94

95

Total
State-owned Units
PrivateShare of foreign （right scale）

96

97

98

99

00

01

Foreign
Collective-owned Units
OthersShare of state-owned (right scale)Figure 2-5. Investment in Fixed Asset (by Type of Investors)
Note:

All industries-basis, includes real estate investment.
Foreign-funded enterprises are included in others up to 1992.
Source: “China Statistical Yearbook”

42

Development Bank of Japan Research Report/ No. 39

RMB trillion
6
Others5

State-owned

4
3
2
1
0
90

91

92

93

94

95

96

97

98

99

00

Figure 2-6. Fixed-Asset Stock
Note:
Covers state-owned enterprises and others above a certain scale.
Source: “China Industrial Statistics Yearbook”

RMB trillion

1.4

70%

State-owned

Collective-owned

Instruments and meters

Electronic equipment

Electric equipment

Transport equipment

Machinery and equipments

Metal products

Non-metal ore mining

Foreign

Metals smelting and products0%
Non-metal mineral products

0.0
Chemicals

10%
Petroleum processing

0.2Electricity and hot water

20%

Paper and products

0.4

Sawmills and furniture30%

Wearing apparel and leather

0.6

Textile goods

40%

Food products

50%

0.8

Metal ore mining

1.0

Crude oil and natural gas

60%

Coal Mining

1.2

Share of foreign

Figure 2-7. Fixed-Asset Stock (2000, Market Price-Basis)
Covers state-owned enterprises and others above a certain scale.
Note:
Source: “China Industrial Statistics Yearbook”

Development Bank of Japan Research Report/ No. 39

43

2.3.

The Role of Foreign-Funded Enterprises in Trade

Expansion of production by foreign-funded enterprises (FFEs) in China has been accompanied by growth in both exports and imports.
Figure 2-8 shows the share of FFEs in overall
exports and imports, and their shares of both are
tending to rise. In 2001, FFEs were responsible
for at least 50% of both export and imports.
Figure 2-9 shows trade balances by type ofcorporation, with FFEs having remained in the
red until the middle of the 1990s, before going
into the black in the past four or five years.
State-owned enterprises (SOEs) are in the black,but the scale of their positive balance has been

declining in recent years.
Figure 2-10 shows the trade balance for
FFEs broken down by type of trade. The positive balance from processing and assembly is
tending to expand, while imports are a recurring
corollary of direct foreign investment. FFEs
imported many facilities, equipment and othercapital goods into China during the investment
boom in the early 1990s, putting their tradebalance into the red. Importation of capital
goods is still continuing, but processing trade
has expanded steadily as China-based production has got into its stride, and the overall tradebalance has moved into the black.
Figure 2-11 shows the trade balance forSOEs. They appear to have maintained a certain

60%
50%
40%
30%
20%
10%
0%
92

93

94

95

96

97

Exports

98

99

00

01

Imports

Figure 2-8. Foreign-funded enterprises’ Shares of Exports and Imports
Sources: “China Foreign Economic Statistics Yearbook,” and “China Customs Statistics”

500
400
300
200
100
0
-100
-200

$100 million

92
Foreign93

94

State-owned

95

96

97

Collective-owned

98

99

00

State+collective(-94)

01
SurplusFigure 2-9. Trade Balances by Type of Corporation
The breakdown of state-owned enterprises and collective enterprises is unknown
before 1995.
Sources: “China Foreign Economic Statistical Yearbook,” and “China Customs Statistics”
Note:

44

Development Bank of Japan Research Report/ No. 39

$100 million
500
400
300
200
100
0
-100
-200
-300
95

96

97

98

Ordinary trade
Process trade (materials provided)
Surplus

99

00

01

Process trade (materials imported)
FDI related

Figure 2-10. Balance of Trade at Foreign-Funded Enterprises
Note:

Processing trade defined as “re-export after processing into finished or intermediate
goods of raw materials, materials, complementary raw materials, components andpackaging imported into China in return for foreign currency. This includes raw
materials for processing imported from foreign countries by enterprises in export
processing zones, and their exports of finished products after processing.” (China
Customs Statistics)
Sources: “China Foreign Economic Statistical Yearbook,” and “China Customs Statistics”$100 million
500
400
300
200
100
0
-100
-200
-300
95

96

97

Ordinary trade + other
Process trade (materials provided)

98

99

00

01

Process trade (materials imported)
SurplusFigure 2-11. Balance of Trade at State-Owned Enterprises
Sources: “China Foreign Economic Statistical Yearbook,” and “China Customs Statistics”

Development Bank of Japan Research Report/ No. 39

45

$100 million
700
600
500
400
300
200
100
0
-100
-200
-300
-400

50%
40%
30%
20%
10%
0%
92

93

94

95

96

97

98

99

00

01

Ordinary trade

Process trade (materials imported)

Process trade (materials provided)

FDI related

Trade Balance

Share of both process trades (right scale)Figure 2-12. Balance of Trade by Type of Trade
Sources: “China Foreign Economic Statistical Yearbook,” and “China Customs Statistics”

international competitiveness up to the middleof the 1990s, reporting positive balances, but
this has been falling in recent years. Consequently, FFEs are becoming increasingly responsible for China’s positive trade balance.
Figure 2-12 illustrates the emergence of FFEs,
with China’s overall pattern of trade displaying
a shift from general to processing trade.
2.4.

The Role of Foreign-Funded Enterprises in Trade Structure

Table 2-2 shows goods with the highest andlowest trade balances in sectors with highweightings of production inducement from import and export, according to the preceding skyline graphs. This is useful for closer examination of processing trade conducted by FFEs.
Within the textile goods sector, negativetrade balances are displayed by goods including
chemical long fibres, chemical short fibres, andfelt/non-woven textiles. The same sector also
contains goods recording large, positive tradebalances, such as textile goods and knit apparel.
In the electrical/electronic equipments, negative

46

Development Bank of Japan Research Report/ No. 39

trade balances are reported by goods including
integrated circuits, diodes, photo tubes, andcondensers; and positive trade balances are reported by goods including transmitter, receiver,videos and televisions. These two sectors thus
typify vertically-integrated processing trade, by
importing parts and materials, and then exporting finished products.
The chemicals sector displays a different
structure. Plastics are widely used in many areas including products from the electrical/electronic equipments and PCs from themachinery sector. Rising production of theabove goods appears to be inducing growing
imports of plastics. Furthermore, it appears that
capital goods such as mother machines are being supplied through imports, since the machinery sector displays negative trade balancesin goods such as plastic processing equipment,
printing equipment, and other equipment.
The iron and steel sector displays a patternof importing high-tech goods and exporting
low-tech goods, since it imports large volumesof high-quality materials such as flat-rolled
steel(cold rolled), and largely exports low
value-added, general-purpose goods like dining

Table 2-2. Breakdown of Principal Traded Goods (2001)
Textile Goods

Mil US $

…

…

…

…

…

331
2,663
449
1,083
1,626
49,869

401
2,932
1,151
1,898
3,330
16,260

-70
-269
-702
-815
-1,70433,609Dyestuffs
Fertilizer
Chemical Industry Goods
Organic Chemistry
Plastic
Total

1,212
391
1,388
4,606
6,699
21,225

1,787
1,587
2,590
8,977
15,26336,436-575-1,196-1,202-4,371-8,564-15,211

Kitchen-use goods
Other article of steel
Ferro-alloy
Structural Parts in Iron
Other cast article of steel

…

…

…

672
3,528
931
1,377
2,629
51,322

1,652
5,278
2,884
3,733
17,00355,908-980-1,750-1,953-2,356-14,374-4,586

Semi-finished produts of ironScrap ingots of ironFlat-rolled steel(clad)
Flat rolled stainless
Flat-rolled steel(cold rolled)
Total

Mil US $

…

148
181
37
193
226
33,627

813
1,051
1,245
1,553
4,024
40,560-665-870-1,208-1,360-3,798-6,933-996-1,058-1,522-1,760-1,816-4,757

Transport Equipment
BicyclesMotorbikes
Bicycle components
TrailarBaby Carriage…

…

Centrifuge
Mold
Printing Machine
Plastic mother machines
Other Machinery
Total

…

…

PCs
Parts for PCs
Air-Conditioner
Calculator
Cocks,Valves and Parts

Exports
Imports
Surplus13,111
4,982
8,129
8,177
6,880
1,297
1,303
282
1,021
610
60
550
1,106
701
405

1,466
1,060
1,634
1,777
1,890
13,035Bus
Truck
Special purpose vehicles
Parts for Motor Vehicles
Passenger Cars
Total

Mil US $Exports
Imports
Surplus
1,004
0
1,004
747
1
746
753
185
568
313
18
295
286
2
284
54
62
47
1,351
36
4,773

…

Machinery

470
2
112
17
74
8,278

92
180
189
2,515
1,265
4,534

…

…

…

Condenser
Telephone
Phototube
Diode
Integrated Circuit
Total

…

Mil US $Exports
Imports
Surplus
1,154
14
1,140
1,046
301
745
702
46
656
724
129
595
462
28
434
…

Iron and Steel Products…

Mil US $Exports
Imports
Surplus
5,143
1,726
3,417
2,850
135
2,715
2,653
61
2,592
2,546
41
2,505
1,592
40
1,552

…

Electrical/Electronic equipments
Transmitter
Electric Range
ReceiverVideoTV

Mil US $Exports
Imports
Surplus
Inorganic Chemistry
2,880
1,644
1,236
Powder・Fireworks
285
2
283
Refined Oil・Cosmetics
410
176
234
Photograph・Movie Products
420
460
-40
Cleanser
402
450
-48

…

Felt/non-woven textiles
Chemical short fibres
fibre products
Wool
Chemical long fibres
Total

Chemistry・Plastic…

…

Textile Goods
Knit apparel
Other
Yarn of Cotton・Cotton Fabrics
Silk

Exports
Imports
Surplus18,967739
18,22813,465475
12,990
3,702
33
3,669
3,662
2,941
721
827
111
716

-38
-118
-142
-1,164-1,229239

Source: “China Customs Statistics”

table- and kitchen-use goods, and other iron andsteel products. The transportation machinery
sector displays a similar pattern, in recording
negative trade balances in the like of passenger
cars and parts for motor vehicles, while being in
the black in low-priced products: bicycles, motorbikes, bicycle components and prams. The
transportation machinery thus also imports
high-tech goods, and exports low-tech goods.

Among the six sectors mentioned in thepreceding paragraphs, both the textile goods
and the electrical/electronic equipments recorded major expansion in production during
the 1990s, with FFEs commanding high sharesin both. These two sectors consequently display
the typical characteristics of processing tradecarried out by FFEs.

Development Bank of Japan Research Report/ No. 39

47

3.

R&D Investment in China

3.1.

The Role of Foreign-FundedEnterprises in R&D

China’s R&D expenditure as a proportion ofsales by mining and manufacturing industry is
only 0.7% (Figure 2-14), which is lower thanJapan’s level at the start of the 1960s (approximately 1%), let alone Japan’s current level(3.7% in 1999).
Some observers point out that China’s
current economic structure resembles Japan in
the 1960s. However, the low level of R&D investment appears to be a major weakness of theChinese economy, since its current level of investment relative to GDP is significantly lower

Technological innovation is a key factor behindautonomous economic growth continuing overthe long term.
Figure 2-13 shows R&D expenditure as aproportion of GDP. China’s R&D ratio of 1.0%
in 2000 is low compared to 3.1% in Japan(1999), and 2.7% in the US. Furthermore,
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%

Japan

China

United States

61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01

Figure 2-13. R&D Expenditure Ratio (against GDP)
Sources:

4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%

“Science & Technology White Paper,” and “China Statistical Yearbook on Science andtechnology”

Japan

China

61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01

Figure 2-14. R&D Expenditure Ratio (against Sales)
Notes: 1. Japan defines the ratio as R&D expenditure within corporations as a proportion of their sales; this covers
only corporations (special corporations not included), and software corporations are included from 1997.
2. China defines the ratio as expenditure on technological development as a proportion of sales; this covers
large and medium corporations.
3. Chinese statistics cover mining and manufacturing industry, Japanese statistics cover manufacturing industry.
Sources: “Science & Technology White Paper (Japan),” and “China Statistical Yearbook on Science and technology(China)”48

Development Bank of Japan Research Report/ No. 39

lower ratios than SOEs in almost all sectors,
and even in the electronics sector where FFEs
are investing aggressively in R&D. This probably reflects FFEs concentrating on production
and processing China, while continuing to carryout most of their R&D within the parent company in the home country, or in other locations.
Independent R&D and technological innovation is essential for economic growth. Thisis borne out by the Chinese government targeting expansion in R&D as a proportion of GDP
from the current 1.0% to at least 1.5% by 2005,
in its tenth five-year plan.

than Japan’s level in the 1960s of approximately 1%.
Figure 2-15 displays R&D expenditure
broken down by industrial sector. R&D expenditure is highest in the electronic equipment,
followed by machinery, transportation equipment, and chemicals respectively. Investment
patterns by type of corporation show foreign-funded enterprises (FFEs) concentrating
expenditure on electronics, and providing overhalf of total R&D investment in electronics in
China. On the other hand, state-owned enterprises (SOEs) tend to concentrate their R&D
investment in processing and assembly sectors
like transportation equipment, machinery andelectronics, and also in the chemicals sector.
Figure 2-16 shows R&D expenditure as aproportion of sales in industrial sectors. Both
FFEs and SOEs display rising R&D expenditure ratios in processing and assembly sectors.
However, it is significant that FFEs display

70

3.2.

R&D Personnel

If R&D is to expand, China must first cultivate
and retain sufficient personnel for the purpose.
Figure 2-17 shows numbers of graduating
university students in China. 950,000 students
graduated from university in 2000, and of these
Share of foreign

RMB100 million

60

60%
50%

50

40%

40

30%

30

20%

20

Light Industry

Foreign

Other manufacturing products

Instruments and meters

Electronic equipment

Electric equipment

Transport equipment

Processing Industry

Materials, Energy

State-owned

Machinery

Metal products

Metals smelting and products

Non-metal mineral products

ChemicalsPetroleum processing

Paper and products

Sawmills and furniture0%
Wearing apparel and leather

0
Textile goods

10%
Food products

10

OthersShare of foreign

Figure 2-15. R&D Expenditure by Industrial Sector and Type of Corporation (1999, Manufacturing)
Note:
Covers large and medium -funded enterprises.
Source: “China Statistical Yearbook on Science and technology”

Development Bank of Japan Research Report/ No. 39

49

3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%

Light Industry

Other manufacturing products

Instruments and meters

Electronic equipment

Electric equipment

Transport equipment

Machinery

Metal products

Metals smelting and products

Non-metal mineral products

ChemicalsPetroleum processing

Paper and products

Sawmills and furniture

Wearing apparel and leather

Food products

Textile goods

0.0%

Processing Industry

Materials, Energy

ForeignState-owned

Figure 2-16. R&D Expenditure Ratio against Sales by Industrial Sector andType of Corporation (1999, Manufacturing)
Note:
Covers large and medium enterprises.
Source: “China Statistical Yearbook on Science and technology”

10,000 pesons

36%

4

34%

3

97

98

99

00

43%
41%
39%

2

37%

1

30%
96

45%

5

32%

95

35%

0
94

01

The department of engineering
0
94

95

50

96

97

98

99

00

01

Share of the engineering
55%

35%

96

97

98

Figure 2-17. Numbers of Students Completing
Under-graduate Degrees
Source:95

Other departments

Total

10

47%

6

38%

94

10,000 persons

7

40%

120
105
90
75
60
45
30
15
0

“China Statistical Abstract”

Development Bank of Japan Research Report/ No. 39

99

00

01

Figure 2-18. Numbers of Students Completing
Post-graduate Degrees

ture numbers of graduates. The numbers ofstudents enrolling in both undergraduate andpost-graduate courses are increasing rapidly atpresent. This apparently results from the establishment in recent years of private-sector universities, in addition to existing national universities. 9.6% of high school graduates went
on to higher education in 200038, and the tenth
five-year plan targets raising of this rate toaround 15%, so the number of students enrolling for higher education is set to expand. We
consequently expect China’s number of new
graduates to start increasing rapidly a few years
hence, and many of these are likely to become
technological researchers.
On the other hand, Table 2-3 shows thatmany of these students wish to join for-38% or 350,000 graduated in engineering subjects. For comparison, a total of 540,000 students graduated in Japan (1999), of which 19%
or around 100,000 students graduated in engineering students. China’s number of graduates
was thus a little under double that of Japan, but
China’s number of engineering graduates washigh at approximately 3.5 times that of Japan.
Figure 2-18 shows numbers of students completing post-graduate degrees in 2000, with
China and Japan at similar levels of 60,000 and
70,000 respectively. Within this, the numbers ofstudent completing engineering subjects was
also quite close at 23,000 for China (1999), and
28,000 for Japan.
Figure 2-19 shows numbers of enrolling
students in China, in order to shed light on fu250(10,000 persons)(10,000 persons)
Undergraduate
Postgraduate courses

200

25
20

150

15

100

10

50

5

0

0
94

95

96

97

98

99

00

01

Figure 2-19. Numbers of Students Enrolling in Undergraduate and Post-Graduate Courses
Source: “China Statistical Yearbook”

Table 2-3. Chinese University Students’ Top Choices of Future Employers
Rank

Company names

1

Microsoft (US)11

China Unicom (China)

21

McKinsey & Company (US)2

P&G (US)

12

China Telecom (China)

22

Du Pont (US)3

Haier (China)

13Intel (US)23

Baosteel (China)

4

IBM(US)

14

Siemens (Europe)

24

CCTV (China)

5

Huawei (China)

15

Founder China)

25Sony (Japan)

6

Legend (China)

16

Nokia(Europe)

26

Ericsson (Europe)

7

Motorola (US)17

Zhongxing (China)

27

GM (US)

8

Bell (Europe)

18

Datang (China)

28

China Mobile (China)

9

Lucent Technologies (US)19

Cisco Systems (US)29

VW (Europe)

10

GE (US)

20

Yahoo (US)30

Changhong (China)

Note:
Sources:

Rank

Company names

Rank

Company names

Parent company names used for foreign -funded enterprises.
Chugoku Keizai, March 2002, etc.
38
The same tertiary education rate was 34.9% for Japan,
or 40.7% including “others” such as students waiting to
re-sit university examinations.
Development Bank of Japan Research Report/ No. 39

51

Table 2-5, China has in the past tended to do
more research in product development closely
related to production processes, and less basic
research, compared to Japan and the US. Now,
however, R&D centres for basic research arestarting to be established.
It is also likely that talented students willaspire to working for the FFEs investing in
R&D in China. By contrast, very few are likely
to wish to work for state-owned enterprises(SOEs) undergoing reform, apart from the few

eign-funded enterprises (FFEs) engaged inelectronics-related fields, which are believed tooffer better salary and other working conditions.
Employment of researchers by FFEs in
China has increased in recent years (Table 2-4).
US and European enterprises have led the way
in establishing R&D bases in China, and Japanese enterprises are now rapidly expanding
their own R&D investment, principally in thefield of software development. As shown by

Table 2-4. Establishment and Expansion of R&D Centres byForeign-funded enterprises in Recent Years
Name of theparent company

Starting
date

City

Number of researchers

Area of study

Nokia

1998

Beijing

150

Mobile telecommunications technology

Microsoft

1998/11

Beijing

60

Basic research on multimedia, information processing
and user interface technology.

Intel

1998/12

Beijing

40

Software for semi-conductor related technology.

HP

2000

Beijing0Technology of digitral signalling, etc.

Hitachi

2001

Beijing

40 in 3 − 4 years

Home use electric devices

NEC

2001/7

Dailian

80. 200 by year 2003.

Development of application software.

Toshiba

2001/7

Shanghai1000 in year 2003.

Design of semi-conductors

Pioneer

2001/9Shanghai

80 in 2 − 3 years.

Digital devices manufactured in China (DVD, etc. )Toshiba

2001/10Beijing

20 at the beginning.

Basic research on voice recognition systems

Michelan

2001/11

Shanghai

25

Wheel tire

Ericsson

2002

Beijing−

Integration of 6 R&D center in China. More weight
to be shift to China.

CSK

1905/6

Shanghai

410 in year 2004, 1000 in 2007.

Software of Information systemNEC

2002/3Beijing・Shanghai

50. 500 in year 2005.

Middleware for telecommunication, development ofapplication software.

Honda

2003/4

Shanghai−motorbicycle

Matsushita

2001/1

Beijing

100 in year 2001, 1500 in 2005.

Digital network

Matsushita

2002/4

Jiangsu

50 in year 2002, 250 in 2005.

Air conditioner, Household appliances

Sources: Chugoku Keizai, April 2002, pp. 19-20; newspaper reports, and websites

Table 2-5. R&D Breakdown by Type of Research (1999)
Share of R&D type
China

Japan

United States

Basic

5%

14%

17%

Application

22%

24%

22%

Development

73%

62%

61%

Total

100%

100%

100%

Source: “China Statistical Yearbook on Science and technology”

52

Development Bank of Japan Research Report/ No. 39

achieving expansion.
The problem of a dual structure within
secondary industry in China is thus clearly evident in students’ employment aspirations. Overthe long term China thus needs to improve theenvironment for retaining young talented researchers in China, and for cultivating theirtalents within SOEs. Such people are likely toplay a leading role if China is to succeed in developing an autonomous economic structure ina full range of industries, and in accumulating
technological expertise in a wide range of fields,
rather than developing only in a narrow rangeof high-tech sectors.
4.
4.1.

The Problems of State-Owned
Enterprises
Reform of State-Owned Enterprises
and Non-Performing Loan

Having examined the presence of foreign-funded enterprises (FFEs) in China, wenext turn to state-owned enterprises (SOEs). On
the one hand the presence of FFEs in the Chinese economy is growing, while on the other
SOEs are severely depressed due to delayed
corporate reform, their leading role in theeconomy having been lost.
The condition of SOEs is attributable totheir delayed reaction to the introduction ofmarket economy, and inadequate management
and administration systems. However, SOEs
have been much more than mere producers ofgoods, also providing all kinds of social services to employees and their families, such as
housing, health care, education and retirement
benefits. Part of their problems was therefore
attributable to their serious structural handicaps
compared to the like of FFEs.
Reform of SOEs was consequently a major
theme of the ninth five-year plan (1996-2000).
This plan introduced support focusing on large
SOEs, while small SOEs were sold off ormerged. It also introduced modern corporations
forms (for example, changing into a joint-stockcompanies and establishment of holding companies), with other measures including standardisation of the bankruptcy system and separation of the social security system from SOEs.

This reform of SOEs got fully into its stride
from 1998, and the tenth five-year plan(2001-2005) is continuing the process with further promotion of the joint-stock system (lowering of state shareholding rates)39, improvement of corporate governance, thorough separation of ownership and business rights, dissolution of monopoly systems in industries such as
railways, air transportation and communications,improvement of the social security system, andso on.
Reform has produced results including
reduction in the number of unprofitable SOEs,
and corresponding decline in the amount of fiscal support given by the government to unprofitable SOEs.40 On the other hand, large-scale
redundancies have become a problem, with 7.4
million people becoming newly unemployed in
1998, followed by 7.8 million in 1999, and 5.1
million in 2000. Redundancies are expected toincrease going forward, as WTO membershipresults in intensifying competition from foreigncountries.
The problem of non-performing loans(NPLs) at state-owned banks is inextricably
linked with the problems of reforming SOEs.
At the core of the state-owned banking system
are four major banks: Bank of China, Industrial
and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China.
These four command around 70% of all lendingby commercial banks, and are also the major
lenders to SOEs.
Before their reform and liberalisation,
SOEs depended for funding upon interest-freestate grants. In the 1980s the Chinese government then replaced this with loans from thestate-owned banks, with the aim of encouraging
profitability among SOEs, through their obligation to pay interest and repay capital. Nevertheless, the profit motive did not take deep root
39
Listings of state-owned enterprises on the stock market were accompanied by the government selling off a
tranche of its shareholding. This allowed the government
to both introduce improvement in corporate governanceand raise funds for social security. However, depressed
stock market conditions prompted temporary suspensionof the process in October 2001, with its cancellation announced in June 2002.
40
RMB33.3 billion in 1998, RMB29.0 billion in 1999,
RMB27.9 billion in 2000 (China Statistics Yearbook).

Development Bank of Japan Research Report/ No. 3953

among SOEs, resulting in expansion of NPLs to
SOEs at state-owned banks.
In response to these NPLs problems, theChinese government injected a total of
RMB270 billion in public funds to boost thecapital of the big four state-owned banks in
1998. It then set up asset management companies at each of the banks in 1999. Before theirtransition into purely private-sector commercial
banks in 1994, the big four state-owned banks
already had NPLs on their books. RMB1.4 trillion out of these NPLs were transferred at bookvalue to the asset management companies(AMCs).
The banks’ asset management companies(Table 2-6) carry out normal loan recovery
functions, exchange NPLs for equity, and since2001 have started to sell NPLs to overseas investors. However, up to September 2001 they

had only disposed of a little under RMB100
billon out of the NPLs total of RMB1.4 trillion,
with loan recovery only amounting to RMB40.2
billion. We expect the loan recovery rate to fall
further, and disposal of losses will probably inthe end become the responsibility of the government.
Furthermore, the big four state-ownedbanks found it difficult to improve the businessof SOEs, which have constantly sought toevade repaying loans, and NPLs have continued
to expand. According to The People’s Bank of
China41, the NPLs rate at the big four commercial banks was an extremely high 25.37% at theend of 2001, with NPLs making up
RMB1,765.6 billion out of total lending of approximately RMB7 trillion (Table 2-7).

Table 2-6. Conditions at the Big Four Asset Management Companies (September 2001)(RMB100 million)
NPL transferredfrom bank

4 AMCsBank of origin

NPL handled

RecoveredassetsRrecovered assets
in cashOriental

2,674 Bank of China

154

66

32

Huarong

4,077 Industrial and Comercial Bank of China

185

89

56

Cinda

3,756 China Construction Bank、National Development Bank

362

181

117

Grate Wall

3,458 Agricultural Bank of China

257

67

28

Total

13,965 −

958

402

233

Source: People’s Daily, November 5, 2001

Table 2-7. The Big Four State-Owned Banks (2000-End)
4 Big State Banks

Number of Institutions

Number of Staff and Workers

Non-performing loan ratio (%)

Bank of China

12,925

471,09728.9

Industrial and Comercial Bank of China

31,673

192,279

25.1

China Construction Bank

25,763

509,572

15.7

Agricultural Bank of China

50,546

427,566

35.0

Total

120,9071,600,514

26.0

Sources: Numbers of branches and employees from “China Statistical Yearbook 2001; ” non-performing loan rates estimatedby Fitch (Nihon Keizai Shimbun, November 10, 2001)

41

Taken from a speech by the governor of The People’s
Bank of China, Dai Xiang-long, in Hong Kong on February 18, 2002.

54

Development Bank of Japan Research Report/ No. 39

4.2.

people working in urban areas has been expanding continuously, reaching 33% and 239.4
million people in 2001.
Going forward, eight to ten million people
are expected to enter the urban labour market
each year. The Chinese government’s tenth
five-year plan targets creation of employment
for eight million people each year, behind
which lies an assumption of 7% annual economic expansion43. China is thus obliged tomaintain challengingly high economic growth
to alleviate continuously growing pressure fromlabour supply.
Figure 2-21 shows numbers of people inemployment, broken down by type of corpora-

The Labour Market andUnemployment

Reform of state-owned enterprises (SOEs) and
unemployment problems are inextricably linked.
Expansion in the number of employed people
has exceeded population growth since the startof the 1990s. As shown in Figure 2-20, thenumber of employed people reached 730.3 million at the end of 2001 42, equivalent to 57% of
a total population of 1,276.3 million people.
The number of people employed in secondary
and tertiary industry is tending to rise, while thenumber working in primary industries is tending to decline. As a consequence, the ratio of
80,00070,00060,00050,00040,00030,00020,00010,0000(10,000 persons)

90

91

35%
30%
25%
20%
15%
10%
5%
0%
92

93

94

95

96

Primary Industry
Tertiary Industry

97

98

99

00

01

Secondary Industry
Employment ratio in urban areas

Figure 2-20. Numbers of People Employed by Type of Industry
Source: “China Labour Statistical Yearbook”

18,000(10,000 persons)

15,00012,000
9,000
6,000
3,000
0
90

91

92
State-owned

93

94

95

96

Collective-owned

97

98
Others9900

01Foreign

Figure 2-21. Numbers of People Employed by Type of Corporation
Note:
The state-owned enterprises category includes state-owned holding companies.
Source: “China Statistical Abstract”
42

Figures from the white paper, Labour and Social Security Conditions in China.

43

According to the PRC’s Ministry of Labour and Social
Security (Yomiuri Shimbun, May 9, 2002).
Development Bank of Japan Research Report/ No. 39

55

tion. The number of people employed in SOEs
has fallen rapidly since 1998 as reform has resulted in redundancies. Foreign-funded enterprises (FFEs) are regarded as being the prime
movers of China’s dramatic economic progressin recent years, but the scale of their ability toprovide employment is still modest comparedto their outstanding growth rates. FFEs areconsequently failing to absorb fully labour laidoff by SOEs.
Figure 2-22 shows China’s number of registered unemployed people in urban areas,
which appears to be extremely low compared toother countries at 5.95 million or 3.1% at theend of 2000, and 6.81 million or 3.6% at the
800
700
600
500
400
300
200
100
0

not included in the official statistics. The real
unemployment rate is thus probably higher than
10%.46
Figure 2-23 shows regional conditions for
unemployment and redundancies. Urban areas
display little regional variation in the official
unemployment rate, but large variations areapparent in broad-based unemployment including redundancies. Such unemployment is relatively low in cities in the coastal region like
Beijing, Shanghai and cities in Guangdong
Province, but is over 10% in Liaoning Provinceand other parts of the north-east, and in central
provinces like Hubei, Hunan and Sichuan,
which have concentrations of heavy industrial,(10,000 persons)

%

10
8
6
4
2
0

90

91

92

93

94

95

Unemployed
Laid-off ratio

96

97

98

99

00

01

Unemployed ratio
Unemployed + laid-off ratio

Figure 2-22. Numbers of Unemployed People in Urban Areas, Unemployment and Redundancy Rates
Note:2001 data calculated from numbers of people laid off and released.
Source: “China Labour Statistical Yearbook”

end of 2001. However, these statistics do notinclude 9.61 million people laid off by SOEs44,
and the broad-based unemployment rate was
8.7% in 2001 after including such people. It isalso believed that unemployment is extremely
high among rural people migrating to urban
areas in search of work 45, but such people are
44

Figures for the end of 2001 calculated from Ministryof Labour and Social Security data.
45
Some movement of labour from rural to urban areas is
officially recognised in forms including seasonal labour,
but illegal movement in search of work is also extremelycommon, and these workers are believed to be exerting
downward pressure on wages in urban areas. This migrantwork force is estimated to have reached 78 million people
56

Development Bank of Japan Research Report/ No. 39

military demand-related and other SOEs undergoing rapid rationalisation. In these less fortunate regions, frequent occurrences of labour
demonstrations against restructuring of SOEs
have been reported in recent years.47
in 2001 (State Council Publicity Office, People.com February 5, 2002).
46
According to Professor Xiao Zhuo-ji of Beijing University, the real unemployment rate in China’s urban areas
is 15-20% (Searchina, March 12, 2002). Furthermore,around 30% or 150 million of the 500 million people employed in rural areas are regarded as surplus labour. This
surplus rural labour could emerge as unemployment asimports of cheap agricultural products start in earnest with
WTO membership.
47
For example, Liaoyang in Liaoning Province was the

In Table 2-8 we have broadly calculated
the likely scale of surplus labour if SOEs push
up their labour productivity to the level of FFEs,
using the labour productivity data at the start ofChapter II. If labour productivity at SOEs
reaches RMB70,000 per person, we project180

surplus labour of approximately 20 million
people at the current level of production. This
projection should be treated with a certain
amount of caution, since it makes no allowances for differences in industrial structure between FFEs and SOEs48, but it suggests that%

(10,000 persons)

18

Unemployed

Laid-off

Laid-off ratio

National Total

Ningxia

Xinjiang

Gansu

Qinghai

Tibet

Shaanxi

YunnanGuizhou

SichuanHainanChongqing

Guangxi

Hunan

Guangdong

Hubei

Henan

Jiangxi

0
Shandong

2

0
Anhui

20
Fujian4

Jiangsu

40

Zhejiang

6

Shanghai

8

60

Jilin

80

Heilongjiang

10

Lianing

12100

Inner Mongolia

120

Hebei

14

Shanxi140

Tianjin16

Beijing

160

Unemployment ratio

Figure 2-23. Unemployment by Region at 2000-End and Redundancies (Urban Areas)
Source: “China Labour Statistical Yearbook”

Table 2-8. Numbers of Employed People if Labour Productivity Rises (Mining and Manufacturing
Industry; State-Owned Enterprises + Non-State-Owned Enterprises above a Certain Scale)
Value added(RMB100 million)

Labour Productivity（yuan/person）

Number ofWorkers(10,000)

Necessary workers under labour productivity rise
50,00060,00070,000State-owned

7,213

36,681

1,966

1,443

1,202

1,030

Collective-owned

3,072

35,581

863

614

512

439

Stock Company

3,584

89,640

400

400

400

400

Private1,318

38,060

346

264

220

188

Foreign

6,090

71,403

853

853

853

853

Others4,117

36,420

1,131

823

686

588

Total
Surplus labour

25,395-45,679
-

5,559
-

4,397
1,162

3,873
1,686

3,499
2,061

Note: Numbers of employed people at joint-stock companies and foreign -funded enterprises are assumed to remain unchanged.
Economist, April 6-12, 2002).
48
As explained in Chapter II, foreign-funded enterprises
are concentrated in electronics where productivity is generally high; state-owned enterprises have high weightings
in materials and energy industries, so simple projection oflabour productivity reaching the same level as foreign-funded enterprises results in an excessively large figure
for surplus labourers.
scene of large-scale demonstrations in March 2002 (The
Development Bank of Japan Research Report/ No. 39

57

further reform of SOEs could result in numbersof unemployed people far in excess of the 6.81
million currently registered as unemployed inurban areas.49
4.3.

Latent National Debt

As mentioned in Chapter I, China’s outstanding
debt including foreign debt in 2001 was low byinternational standards at 21.2% of GDP. On
the other hand, the government may finally finditself responsible for the costs of all the problems examined above relating to state-owned
enterprises (SOEs), non-performing loans(NPLs) and unemployment. It is consequently
advisable to examine latent national debt (thegovernment’s broad-based obligations).
For example, statistics on outstanding national bonds do not include the RMB270 billion(equivalent to 3.0% of GDP) in extraordinary
national bonds issued when the big fourstate-owned banks received capital injections in
1998. Nevertheless, the government is clearly
obliged to redeem this bond issue. Furthermore,costs incurred by the banks’ asset managementcompanies in disposing of NPLs will also
probably end up being the government’s responsibility. The big four state-owned banks
also still display a significant level of NPLs,
and they may need government funds to disposeof them. Moreover, social security costs are set
to expand as a result of factors including unemployment benefits expanding with the numberof unemployed people, and insufficient reserves
for retirement benefits. Latent national debt
thus stands to expand further due to continuing
reform of SOEs, and if SOEs are exposed tointernational competition as a result of WTO
membership.
Outstanding government debt including
latent debt can be calculated in a number ofways, and it is variously estimated at 50-150%
of GDP.50 The Chinese government has given
recognition to its latent debt51, and has indicatedthat it will adjust its currently aggressive fiscal
policy over the medium and long terms.52

50

49

Although not examined in this report, China’s agricultural sector is inefficient, and some estimates put the
number of surplus labourers at 150 million people. Greater
agricultural efficiency as a result of WTO membership islikely to result in emergence of this surplus labour as unemployment, and this could push up overall unemployment in addition to effects from reform of state-owned
enterprises.
58

Development Bank of Japan Research Report/ No. 39

For example, the IMF’s calculation for 2000 puts
China’s fiscal deficit at 8% of GDP and outstanding government debt at 50% of GDP, including disposal of
non-performing loans and social security costs such as
retirement benefits. City Group calculates outstanding
government debt at the end of 2000 at 83.5% of GDP(City Group materials, January 2002).
51
According to the PRC’s Minister of Finance, Xiang
Huai-cheng, in a declaration at the High-Level Investigative Commission on Chinese Development, March 25,
2001.
52
According to declarations by to the PRC’s Minister ofFinance, Xiang Huai-cheng (Searchina, May 29, 2002;
Nippon Kogyo Shimbun, May 2, 2002).

Conclusion
As laid out in Chapter II, secondary industry in
China displays a dual structure of foreign-funded enterprises (FFEs) and state-owned
enterprises (SOEs). Concentration on developments among FFEs tends to result in alarmist
views of China as an economic threat, while on
the other hand concentration on SOEs struggling to reform tends to produce views that
China’s development will reach a limit.53 We
pointed out this polarisation in opinions on
China’s prospects at the very start of this report,
and we attribute this polarisation to the dual
structure evident in secondary industry. We believe that a balanced view of the threat posed by
China and the challenges it faces, is only possible after correct understanding of this dual
structure.

53

Some observers are pessimistic about China’s prospects because of agricultural factors.

When appraising the overall Chinese
economy containing this dual structure, it isadvisable to examine the relationship between
FFEs and SOEs, to assess how they are likely todevelop, and also to examine the likely development of private-sector corporations in China(a subject this report does not tackle). The competitiveness of foreign and other enterprises in
China could suffer through higher social unrest
and government risk, and a heavier burden fromsocial costs like unemployment insurance,
stemming in particular from the biggest problem faced by SOEs; unemployment.54 We believe that this point holds the key to Chinese
economic prospects.
A full understanding of this point requires
examination of a wide range of areas including
political and social trends, in addition to economic aspects, and this remains a topic for future research.

54
Conversely, a large number of surplus labourers could
keep wages low, becoming a factor in maintaining thecompetitiveness of China’s labour-intensive industries.

Development Bank of Japan Research Report/ No. 39

59

in agricultural products of 70. Consequently,
domestic production volume is 70 out of thetotal volume required to satisfy domestic demand of 100, giving a self-sufficiency rate of70%.
Similarly, suppose that production volume
sufficient to satisfy direct and indirect domestic
demand for industrial products in both agriculture and industry is set at 100, then production
inducement from exports is 50 and (negative)
production inducement is 20. Domestic production volume indicated by the light-shaded areais therefore 130. Domestic production volumeof 130 against 100 satisfies domestic demand
results in a self-sufficiency rate of 130%.
Furthermore, column width indicates production share. In the example below, agriculture has production share of 33% compared to
67% for industry. The industry column is thus
approximately twice as wide as the agriculturecolumn.

Appendix: Interpretation of
Skyline Graphs
The graph below gives a simplified example
using two sectors: agriculture and industry. If
production volume sufficient to satisfy direct
and indirect domestic demand for agricultural
products in both agriculture and industry is set
at 100, then domestic production volume of 30
is required to satisfy direct and indirect export
demand. Furthermore, suppose that direct andindirect reduction of domestic production volume in agriculture as a result of imports by both
agriculture and industry was 60. The height of
the agriculture column is 130, representing thetotal of domestic and export demand, which are
100 and 30 respectively. Import volume of 60 ismarked by the dark-shaded area of the column,
and this area extends downwards from the topof the column. The remaining light-shaded area
corresponds with domestic production volume

Industry

←33％→

←67％→

←------Export---→50←------Domestic demand------→

100

20

30
100

←Import→←Export→60←------Domestic demand------→
Agriculture←------Import------→

70

100

Domestic production↑

130

Self supply
ratio←--------Domestic production--------→Skyline Graph Example→

Production share

Notes: 1. Domestic production, exports and imports in the graph represent the value of production inducementfrom these sources.
2. Production induced by domestic demand is given an index value of 100, with inducement from exports
and imports given proportionate index values.

60

Development Bank of Japan Research Report/ No. 39

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Development Bank of Japan Research Report/ No. 39

61

List of Back Numbers (Including JDB Research Report)
No. 39 China’s Economic Development and the Role of Foreign-Funded Enterprises (this issue)
No. 38 Decline in Productivity in Japan and Disparities Between Firms in the 1990s: An Empirical Approach Based on Data Envelopment Analysis, April 2003
No. 37 Trends in Socially Responsible Investment: Corporate Social Responsibility in a New Phase,
March 2003
No. 36 Recent Trends in the Japanese Economy: A Medium-term Scenario for the Sustainability of theJapanese Economy, February 2003
No. 35 Concerns for the Future and Generational Consumption Behavior, February 2003
No. 34 Prospects and Challenges Surrounding Japan’s Electrical Equipment Industry: General Electrical
Equipment Manufacturers’ Restructuring of Operations and Future Prospects, November 2002
No. 33 Survey on Planned Capital Spending for Fiscal Years 2001, 2002 and 2003, November 2002
No. 32 Behavior Trends of Japanese Banks toward the Corporate Sector and Their Impact on the Economy, October 2002
No. 31 Microstructure of Investment and Employment Dynamics: Stylized Facts of Factor Adjustment
Based on Listed Company Data, October 2002
No. 30 Recent Trends in the Japanese Economy: Globalization and the Japanese Economy, August 2002
No. 29 Corporate Financing Trends in Recent Years: Fund Shortages and Repayment Burden, August
2002
No. 28 Urban Renewal and Resource Recycling: For the Creation of a Resource Recycling Society, July
2002
No. 27 Labor’s Share and the Adjustment of Wages and Employment, June 2002
No. 26 Survey on Planned Capital Spending for Fiscal Years 2001 and 2002, May 2002
No. 25 Environmental Information Policy and Utilization of Information Technology: Toward a Shift inEnvironmental Policy Paradigm, March 2002
No. 24 The Changing Structure of Trade in Japan and Its Impact: With the Focus on Trade in Information Technology (IT) Goods, March 2002
No. 23 Microstructure of Persistent ROA Decline in the Japanese Corporate Sector: Inter-company
Disparties and Investment Strategies, March 2002
No. 22 Recent Trends in the Japanese Economy: The Japanese Economy under Deflation and Prospects
of Evolution, February 2002
No. 21 Survey on Planned Capital Spending for Fiscal Years 2000, 2001 and 2002, December 2001
No. 20 Current Situation and Challenges for Cable Television in the Broadband Era, October 2001
No. 19 Recent Trends in the Japanese Economy: The Japanese Economy under Deflation, August 2001
No. 18 Introduction of a Home Appliance Recycling System: Effects & Prospects: Progress towards
Utilisation of Recycling Infrastructure, June 2001
No. 17 Survey on Planned Capital Spending for Fiscal Years 2000 and 2001, June 2001
No. 16 Revitalization of Middle-aged and Elderly Workers in Japan’s Labor Markets: Requiring the
Expansion of the Vocational Training Functions, March 2001
No. 15 Risk-Averting Portfolio Trends of Japanese Households, March 2001
No. 14 Consumption Demand Trends and the Structure of Supply: Focus on Retail Industry Supply Behavior, March 2001
No. 13 Recent Trends in the Japanese Economy: Weakness of Current Economic Recovery and Its

Background, March 2001
No. 12 Empirical Reassessment of Japanese Corporate Investment Behavior: Features and Changes
since the 1980s, based on Micro-level Panel Data, March 2001
No. 11 Survey on Planned Capital Spending for Fiscal Years 1999, 2000 and 2001, October 2000
No. 10 Job Creation and Job Destruction in Japan, 1978-1998: An Empirical Analysis Based on Enterprise Data, September 2000
No. 9

Recent Trends in the Japanese Economy: Information Technology and the Economy, September
2000

No. 8

Trend of International Reorganization Affecting the Japanese Automobile and Auto Parts Industries, June 2000

No. 7

Survey on Planned Capital Spending for Fiscal Years 1999 and 2000, June 2000

No. 6

Current Status and Future Perspective of the Japanese Remediation Industry: Technology andMarket for Underground Remediation, May 2000

No. 5

Recent Trends in the Japanese Economy: The 1990s in Retrospect, March 2000

No. 4

Destabilized Consumption and the Post-bubble Consumer Environment, February 2000

No. 3

The Slump in Plant and Equipment Investment in the 1990s: Focusing on Lowered Expectations,the Debt Burden and Other Structural Factors, January 2000

No. 2

Survey on Planned Capital Spending for Fiscal Years 1998, 1999 and 2000, November 1999

No. 1

Corporate Strategies in Japan’s Semiconductor Industry: Implications of Development in Other
Asian Countries, November 1999

JDB Research Report
No. 96 Recent Trends in the Japanese Economy: Focused on Fixed Investment and Capital Stock, August 1999
No. 95 Efforts to Protect the Natural Environment in the United States and Germany: Environmental
Mitigation and Biotope Conservation, July 1999
No. 94 Survey on Planned Capital Spending for Fiscal Years 1998 and 1999, June 1999
No. 93 Towards the realization of ‘environmental partnership’: A survey of Japan’s environmental NPO
sector through comparison with Germany, June 1999
No. 92 The Impact of Demographic Changes on Consumption and Savings, March 1999
No. 91 Recent Research and Development Trends in Japanese Enterprises: Technology Fusion, March
1999
No. 90 Recent Trends in the Japanese Economy: Prolonged Balance Sheet Adjustment, January 1999
No. 89 Impact of Asset Price Fluctuations on Household and Corporate Behavior: A Comparison between Japan and the U.S., December 1998
No. 88 Survey on Planned Capital Spending for Fiscal Years 1997, 1998, and 1999, December 1998
No. 87 Foreign Exchange Rate Fluctuations and Changes in the Input-Output Structure, November 1998
No. 86 Structural Changes in Unemployment of Japan: An Approach from Labor Flow, November 1998
No. 85 Recent Trends in the Japanese Economy: Characteristics of the Current Recession, August 1998
No. 84 R&D Stock and Trade Structure in Japan, August 1998
No. 83 Survey on Planned Capital Spending for Fiscal Years 1997 and 1998, August 1998
No. 82 The Significance, Potential, and Problems of DNA Analysis Research: Establishing Public Ac-

ceptance is Essential, May 1998
No. 81 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996, 1997
and 1998 Conducted in August 1997, March 1998
No. 80 Recent Trends in the Japanese Economy: Growth Base of the Japanese Economy, January 1998
No. 79 Information Appliances: The Strength of Japanese Companies and Tasks for the Future, January
1998
No. 78 Challenges and Outlook for the Japanese Machinery Industries: Impact of ISO14000 Series andEnvironmental Cost, January 1998
No. 77 Current Conditions and Issues of Computerization in the Health Care Industry: For the Construction of a Health Care Information Network, January 1998
No. 76 Household Consumption and Saving in Japan, December 1997
No. 75 The Direction of Japanese Distribution System Reforms: Strengthening the Infrastructure to
Support Diverse Consumer Choices, November 1997
No. 74 Foreign Direct Investments by Japanese Manufacturing Industries and Their Effects on International Trade, October 1997
No. 73 The Impact of the Changing Trade Structure on the Japanese Economy: With Special Focus on
the Effects on Productivity and Employment, October 1997
No. 72 An Analysis of Foreign Direct Investment and Foreign Affiliates in Japan, August 1997
No. 71 Recent Trends in the Japanese Economy: Stock Replacement and New Demand as Aspects of
Economic Recovery, August 1997
No. 70 Corporate Fundraising: An International Comparison, June 1997
No. 69 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and1997 Conducted in February 1997, May 1997
No. 68 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and1997 Conducted in August 1996, August 1997
No. 67 An International Comparison of Corporate Investment Behavior: Empirical Analysis Using Firm
Data from Japan, France and the US, April 1997
No. 66 Housing in the National Capital: Analysis of the Market for Housing using Micro Data, March
1997
No. 65 The Environment for Locating Business Operations in Major East Asian Cities, January 1997
No. 64 Direction of Reconstruction of Business Strategy in the Chemical Industry, January 1997
No. 63 Reflection on Discussions Concerning Regulation of the Electric Power Industry: Deregulationof the Electric Power Industry in Japan and Implication of Experiences in the United States, December 1996
No. 62 Current Status and Future Perspective of the Japanese Semiconductor Industry, November 1996
No. 61 A Breakthrough for the Japanese Software Industry?: Responsiveness to Users’ Needs is the key,
October 1996
No. 60 Recent Trends in the Japanese Economy Focusing on the Characteristics and Sustainability of
the Current Economic Recovery, September 1996
No. 59 Analysis of the Primary Causes and Economic Effects of Information: Related investment in the
United States and Trends in Japan, August 1996
No. 58 Selected Summaries of Research Reports: Published in FY1995, June 1996
No. 57 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1995 and1996 Conducted in February 1996, May 1996

No. 56 Recent Trends in the Japanese Economy, May 1996
No. 55 Issues Concerning the Competitiveness of the Japanese Steel Industry, February 1996
No. 54 Changes in the Financial Environment and the Real Economy, January 1996
No. 53 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994, 1995
and 1996 Conducted in August 1995, October 1995
No. 52 Current Economic Trends: Focusing on the Appreciation of the Yen and its Effects, October
1995
No. 51 Problems Concerning the International Competitiveness of the Petrochemical Industry, October
1995
No. 50 An Economic Approach to International Competitiveness, October 1995
No. 49 Selected Summaries of Research Reports Published in FY1994, July 1995
No. 48 Strategies for Improving the Efficiency of the Japanese Physical Distribution System: Part 2,
July 1995
No. 47 Issues on International Competitive Strength of the Auto Industry, June 1995
No. 46 Problems Concerning the International Competitiveness of the Electronics and Electric Machinery Industry, June 1995
No. 45 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994 and1995 Conducted in March 1995, June 1995
No. 44 Strategies for Improving the Efficiency of the Japanese Physical Distribution System, March
1995
No. 43 Capital Spending Recovery Scenario Cycle and Structure, August 1994
No. 42 Progress of International Joint Development between Industrialized Countries on the Private
Level, May 1994
No. 41 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993, 1994
and 1995 Conducted in August 1994 , November 1994
No. 40 Selected Summaries of Research Reports Published in FY1993, June 1994
No. 39 Recent Trends in Japan’s Foreign Accounts, April 1994
No. 38 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993 and1994 Conducted in March 1994, April 1994
No. 37 Economic Zones and East Asia Prospect for Economic Activity Oriented Market Integration,
December 1993
No. 36 Japanese Corporate Responses to Global Environmental Issues, December 1993
No. 35 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992, 1993
and 1994 Conducted in August 1993, September 1993
No. 34 Structure of Profit to Capital in the Manufacturing Industry, September 1993
No. 33 Comparison of the Japanese and The U.S. Labor Markets, October 1992
No. 32 The Relative Competitiveness of U.S., German, and Japanese Manufacturing, March 1993
No. 31 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992 and1993 Conducted in March 1993, April 1993
No. 30 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991, 1992
and 1993 Conducted in August 1992, December 1992
No. 29 Flow of Funds in the 80s and Future Corporate Finance in Japan, November 1992

No. 28 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991 and1992 Conducted in February 1992, April 1992
No. 27 An Analysis of Foreign Direct Investment in Japan, March 1992
No. 26 Projection of Japan's Trade Surplus in 1995: Analysis of Japan's Trade Structure in the 80s,
February 1992
No. 25 Intra-Industry Trade and Dynamic Development of The World Economy, November 1991
No. 24 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990, 1991
and 1992 Conducted in August 1991, September 1991
No. 23 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990 and1991 Conducted in February 1991, March 1991
No. 22 Trends of the Petrochemical Industry and its Marketplace in East Asia, March 1991
No. 21 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989, 1990
and 1991 Conducted in August 1990, September 1990
No. 20 Deepening Economic Linkages in The Pacific Basin Region: Trade, Foreign Direct Investment
and Technology, September 1990
No. 19 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989 and1990 Conducted in February 1990, March 1990
No. 18 Petrochemicals In Japan, The US, and Korea an Assessment of Economic Efficiency, February
1990
No. 17 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1988, 1989
and 1990 Conducted in August 1989, October 1989
No. 16 Impact of the EC Unification on Japan’s Automobile and Electronics Industries, August 1989
No. 15 Industrial and Trade Structures and the International Competitiveness of Asia’s Newly Industrializing Economies, August 1989
No. 14 The Japan Development Bank Reports on Capital Investment Spending: Survey for Fiscal Years
1988 and 1989 Conducted in February 1989, March 1989
No. 13 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1987, 1988
and 1989 Conducted in August 1988, September 1988
No. 12 Growing Foreign Investors’ Activities and the Future of Internationalization, September 1988
No. 11 Futures Tasks and Prospects for the Japanese Machine-Tool Industry, July 1988
No. 10 International Division of Labor in the Machine Industries Among Japan, Asia’s NICs and
ASEAN Countries, June 1988
No. 9

Trends of the Petrochemical Industry and its Marketplace in East Asia around Japan, May 1988

No. 8

The International Competitiveness of Japan and U.S. in High Technology Industries, April 1988

No. 7

The Japan Development Bank Reports on Private Fixed Investment in Japan, March 1988

No. 6

Economic Projections of the Japan’s Economy to the Year 2000, February 1988

No. 5

The Japan Development Bank Reports on Private Fixed Investment in Japan, September 1987

No. 4

Current Trends in the Japanese Auto Parts Industry in Overseas Production, July 1987

No. 3

Current Moves for Foreign Direct Investment into Japan, May 1987

No. 2

Overseas Direct Investments by Japanese Corporations, May 1987

No. 1

Current U.S. Consumption Trends, May 1987