Growth Mechanisms and Sustainable Development of the Chinese Economy : Comparison with Japanese Experiences

What can Chinese economists learn from the Japanese economic boom and subsequent stagnation? This project aims to institutionally and empirically investigate the growth mechanism and determinants of sustainable development in China compared with Japanese experiences. This is the first challenge in conducting a comparative study on China and Japan's economic growth and development. We aim to investigate the economic system transition and its influence on the Chinese and Japanese economy from macroeconomic and microeconomic perspectives. This book will interest economists, scholars of comparative politics, and scholars of China or Japan's economic development. Dr. Xinxin Ma is a professor at the Faculty of Economics, Hosei University. She was the editor of the Japanese Journal of Comparative Economics, Asian Studies, and the Journal of Chinese Economics. Her research expertise concerns income inequality and social security in China. Her academic papers have been published in peer-reviewed journals such as the China Economic Review, Journal of Asian Economics, and Economic Systems. Her recent books are Female Employment and Gender Gap in China (Springer, 2021), and Employment, Retirement and Lifestyle in Aging East Asia (Palgrave Macmillan, 2021). Dr. Cheng Tang is a professor at the Faculty of Economics, Chuo University. He was the editor of Asian Studies. His research expertise is in the Chinese financial system and household finance. His academic papers have been published in JINGJI YANJIU, Ajia Keizai, and Journal of Chinese Economic and Business Studies. His recent book is Uncovering the Mechanisms of "High Savings Rate" and "Excessive Debt": An Understanding of Chinese Economy from the Angle of Household and Corporate Financial Behavior (Yuhikaku Press, 2021). Preface Contents Notes on Contributors Abbreviations List of Figures List of Tables 1 Introduction 1.1 Background and Purpose of This Book 1.1.1 Background of This Book 1.1.2 Purpose of This Book 1.2 Main Content of This Book 1.3 Significance and Contributions of This Book Notes References Part I Mechanisms of Economic Growth and Development 2 Chinese and Japanese Development Process Compared: Economic and Politico-Economic Perspectives 2.1 Introduction 2.2 Comparison of Development Processes 2.3 Several Particularities of China’s Economic Development Policies and Institutions 2.3.1 One-Child Policy 2.3.2 Agricultural Collectivization and People’s Communes 2.3.3 Township and Village Enterprises (TVEs) 2.3.4 State-Owned Enterprises (SOEs) 2.3.5 Special Economic Zones (SEZs) 2.4 Two Special Topics of Development Economics 2.4.1 Flying Geese Pattern of Economic Development 2.4.2 Lewisian Turning Point 2.5 Behind China’s Development Characteristics: Politics in Command 2.5.1 Rural–Urban Divide: Two Types 2.5.2 Developmentalism 2.6 Conclusions Notes References 3 Trade, FDI, and Economic Growth 3.1 Introduction 3.2 Analysis Perspective and Target 3.3 Catch-Up Stage: Earning Foreign Exchange and Increasing Surplus of Current Account Balance 3.3.1 Japan: Overcoming the Constraint of the Balance of Payments and Utilizing Industrial Heritage in Prewar Period 3.3.2 China: Opening to the Outside World and Market Transition 3.3.3 Comparison: Differences in Initial Conditions and Use of Foreign Capital 3.4 Grow-Up Stage: Coping with Excessive Savings and External Imbalances 3.4.1 Japan: Export-Led Growth and Trade Frictions with the United States 3.4.2 China: U.S.–China Trade Imbalance and Competition for Technological Supremacy 3.4.3 Comparison: Trade Frictions with the U.S. and Differences in Responses to Market and Non-Market Economies 3.5 A Comparison of China and Japan: The Benefits of Globalization and Global Governance Notes References 4 Digital China: Policy Initiatives, Progress, and Challenges 4.1 Introduction 4.2 Digitalization in China 4.2.1 Rise of China’s Digital Economy and Policy Initiatives 4.2.2 Level of Digital Usage in China 4.3 Impact of Digital China 4.3.1 The Future of Work in China 4.3.2 Amazon Effect in China 4.3.3 Digital Belt and Road 4.4 Conclusions Notes References 5 Agricultural Development in China: Comparison with Japanese Experience 5.1 Introduction 5.2 Brief History of Agricultural Development in China 5.2.1 Chinese Agriculture from an International Perspective 5.2.2 Agriculture in the Socialist Era 5.2.3 Agriculture Under the Reform and Opening-Up Policy 5.2.4 Changes in Agriculture with Rapid Economic Development Since 2000 5.3 Comparison with Experiences in Japan 5.3.1 Development Path of Agriculture in General 5.3.2 Experiences of Structural Adjustment in Japan 5.3.3 Agricultural Policy Cycle 5.4 Conclusions Notes References 6 Financial Development Post-World War II in Japan: Insights for China 6.1 Introduction 6.2 Financial Development in the High Economic Growth Era (Hge) (1955–1975) 6.2.1 Three Major Political-Economic Reformations Before High Economic Growth 6.2.2 Banking and Educational Reformations After World War II 6.2.3 Financial Development in the High Economic Growth Era 6.2.4 Government Financial Institutions and Long-Term Credit Banks 6.2.5 Economic and Financial Policies During the HGE 6.3 Financial Prosperity in the Bubble Economy 6.3.1 Roads to the Bubble Economy in the 1980s 6.3.2 Process of the Bubble Economy from 1985 to 1990 6.3.3 Analysis of the Stock and the Real Estate Markets in the Bubble Economy 6.3.4 Tobin’s Theory and the Bubble Economy 6.4 Financial Restructuring After the Bubble Burst 6.4.1 The Greatest Depression After the Bubble Burst in the Japanese Economy 6.4.2 Retrospective View of Past Restructuring of the Banking System 6.4.3 Restructure of Banking System in Heisei Depression 6.4.4 Consequence of the Write-Off of Non-Performing Loans in Recent Restructure of Banking 6.5 Changing Structure of Flow of Funds Account in Twenty-First Century 6.5.1 Structural Change of the Financial System 6.5.2 Stagnation of Financial Development in the Declining Economic Growth 6.6 The China Story 6.6.1 The Banking System and “the Great Wall of Debt” 6.6.2 The Real Estate Bubble 6.7 Conclusions Notes References 7 Human Capital Agglomeration Effect and Regional Disparity in China 7.1 Introduction 7.2 Income Inequality Between Regions in China Since the 1990s and Relevant Factors 7.3 Empirical Model 7.3.1 Basic Model 7.3.2 Barro Regression with Human Capital Agglomeration Effect 7.4 Data and Estimation Results 7.4.1 Data 7.4.2 Estimation Results 7.5 A Comparison with China and Japan During High Economic Growth Era 7.5.1 Population Migration and Income Inequality in Japan 7.5.2 Population Migration and Income Inequality in China 7.6 Conclusions and Future Issues Appendix The Solow–Swan Model with Human Capital Agglomeration Effect Notes References 8 Environmental Policies and Water Resource Management 8.1 Introduction 8.2 Research Background 8.2.1 Water Environmental Problem in China 8.2.2 Environmental Policy in Rapid Economic Growth Era 8.2.2.1 Japan 8.2.2.2 China 8.3 Case Study 8.3.1 Qualitative Control 8.3.2 Quantitative Control 8.3.2.1 Water Right Transfer Among Sectors 8.3.2.2 Participatory Irrigation Management (PIM) 8.3.3 Conclusions: Policy Implication Notes References 9 Dual Economic Structure, Surplus Labour and Rural-Urban Migration 9.1 Introduction 9.2 Surplus Labor and the Lewisian Turning Point in China and Japan 9.2.1 Agricultural Surplus Labor in China and Japan 9.2.2 Change in Wage Differentials in China and Japan 9.3 Wage Differentials Between Migrant and Local Urban Workers in China 9.3.1 Background 9.3.2 Literature Review on Wage Differentials Between Migrant and Local Urban Workers 9.3.3 Methodology 9.3.3.1 Model 9.3.3.2 Data 9.3.4 Results 9.3.4.1 Results Based on Descriptive Statistics 9.3.4.2 Decomposition Results of the Wage Differentials Between Migrant and Local Urban Workers 9.4 Conclusions Appendix Notes References Part II Mechanisms of Behaviors of Corporates, Households and Individuals 10 Household Consumption and Manufactural Industrial Upgrading 10.1 Introduction 10.2 Data and Matching Process 10.2.1 Data 10.2.2 Matching Process 10.3 Model and Variables 10.3.1 Model 10.3.2 Descriptive Statistics 10.4 Resultss 10.4.1 Baseline Results 10.4.2 Extended Results on the Demand Mechanism for Industrial Upgrading 10.4.2.1 Profit Drive Mechanism Test 10.4.2.2 Export Drive Mechanism Test 10.4.2.3 Private Sector—Mechanism Tests 10.5 Conclusions Appendix Note References 11 Enterprise Ownership Reform and Wage Gaps Between Public and Private Sectors 11.1 Introduction 11.2 Institutional Background: State-owned Enterprises Reforms and Changes of Wage Policy in China 11.2.1 Wage Policy Reform in the 1980s 11.2.2 Wage Policy Reform in the 1990s 11.2.3 Wage Policy Reform in the 2000s 11.3 Methodology 11.3.1 Models 11.3.2 Data 11.4 Results 11.4.1 Results of Descriptive Statistics 11.4.2 Determinants of the Probability of Working in Public Sector 11.4.3 Wage Gaps Between Public and Private Sectors 11.4.4 Wage Structure in Public and Private Sectors 11.4.5 Decomposition Results of Wage Gaps Between Public and Private Sectors 11.5 Conclusions Notes References 12 Communist Party of China Membership and Wage Gaps Between Party Members and Non-members 12.1 Introduction 12.2 Background: The CPC in Chinese Companies 12.2.1 The CPC Organization in China 12.2.2 The Role of the CPC in Chinese Companies 12.3 Literature Review 12.4 Methodology and Data 12.4.1 Models 12.4.2 Data and Variables 12.5 Results 12.5.1 The Determinants of Participation in CPC Organizations 12.5.2 The Wage Premium of CPC Membership 12.5.3 Decomposition Results of the Wage Gap Between CPC Members and Nonmembers Based on Blinder-Oaxaca Decomposition Model 12.5.4 Decomposition Results of the Wage Gap Between CPC Members and Nonmembers Based on Oaxaca-Ransom Decomposition Model 12.6 Conclusions Appendix Notes References 13 Trends of Labor Union Effect on Wage 13.1 Introduction 13.2 Labor Union System in China and Japan 13.2.1 History of Labor Unions in China 13.2.2 Disparity of Labor Union Systems Worldwide and Features of Chinese Labor Union 13.3 Literature Review 13.4 Methodology: Data and Model 13.5 Results 13.5.1 Descriptive Statistics in China and Japan 13.5.2 Union Effect on Wages in China and Japan 13.5.3 Trend of Union Effect on Wage in China and Japan 13.6 Conclusion Notes References 14 Employment Equality Policy and Gender Gap in Labor Market 14.1 Introduction 14.2 Female Employment Promotion Policies in China and Japan 14.2.1 Female Employment Promotion Policy in China 14.2.2 Female Employment Promotion Policy in Japan 14.2.2.1 Policies to Prohibit Sexism and Support Positive Employment Actions 14.2.2.2 Childcare Leave System and Work-Life Balance Policy 14.2.2.3 Policies for Part-Time Workers 14.3 Gender Gap in Chinese and Japanese Labor Markets 14.3.1 Gender Gap in China 14.3.2 Gender Gap in Japan 14.4 Empirical Studies on Gender Wage Gap in China and Japan 14.4.1 Decomposition Methods of Gender Wage Gap 14.4.2 Empirical Study for China 14.4.3 Empirical Study for Japan 14.5 Conclusions Notes References 15 Public Pension Policy Reform and Labor Force Participation 15.1 Introduction 15.2 Public Pensions in China and Japan 15.3 Literature Review 15.3.1 Channels Exploring the Impact of Public Pensions on Labor Force Participation 15.3.2 Empirical Studies on the Impact of Pension on Labor Force Participation 15.3.3 Contributions of the Study 15.4 Methodology and Data 15.4.1 Model 15.4.2 Data 15.5 Results 15.5.1 The Impact of the NRPS on Labor Force Participation in China 15.5.2 The Impact of Pensions on Labor Force Participation in Japan 15.6 Conclusions Appendix Introduction of the NRPS in China Calculation for the Full Amount of Employees’ Pension Benefits for Japan Notes References 16 Bequest Motives and Saving Rate of Elderly Households 16.1 Introduction 16.2 Literature Review 16.3 Model and Variables 16.3.1 Model 16.3.2 Data Source and Variables 16.4 Estimation Results 16.4.1 Benchmark Regression 16.4.2 Instrumental Variable Estimation 16.4.3 Propensity Score Matching Estimation Result 16.5 Further Analysis 16.5.1 The Influence of Bequest Motives on the Saving Rate of Urban and Rural Elderly Households 16.5.2 Influence of Bequest Motives on the Saving Rate of Elderly Households with Different Wealth Levels 16.5.3 The Influence of Bequest Motives on the Saving Rate of Elderly Households with Different Children’s Living Conditions 16.6 Robustness Check 16.6.1 The Sample Robustness Test 16.6.2 The Robustness Test of the Estimation Method 16.7 Conclusions Notes References 17 Income Inequality and Subjective Well-Being 17.1 Introduction 17.2 Literature Review 17.2.1 The Channels of Effects of Absolute and Relative Incomes on SWB 17.2.2 The Results of Empirical Studies on Absolute and Relative Incomes for China and Japan 17.3 Methodology and Data 17.3.1 Model 17.3.2 Data 17.3.3 Variable Setting 17.4 Results 17.4.1 Results Using Cross-Sectional Data for China 17.4.2 Results Using Longitudinal Data for China 17.4.3 Results by Heterogenous Group for China 17.4.4 Results of Robustness Checks for China 17.4.5 Studies Comparing China and Japan 17.5 Conclusions Notes References Index