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The Developing Economies

Volume 36, Number 1 (March 1998)

The Developing Economies ■ The Developing Economies Volume 36, Number 1 (March 1998)
■ B5
■ 105pp.
■ Published in March 1998
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Yongzheng Yang and Chuanshui Zhong, "China's Textile and Clothing Exports in a Changing World Economy," pp. 3-23.

The rapid expansion of China's textile and clothing exports in the past two decades has raised fear that there are not enough export markets left for other low-cost developing economies. Using a global general equilibrium model this study shows that with rapid economic growth China will increasingly shift to more capital-intensive exports and its reliance on textiles and clothing will decline. Uncertainty surrounding China's WTO accession will further encourage export diversification. Slower growth in China will pose less competition to other low-cost exporting economies in the short run, but it will prolong the competition, as well as the pressure for adjustment in industrial economies. It is in the interest of both importing and exporting economies that barriers to world trade in textiles and clothing continue to be reduced after the phasing out of the MFA, in order to accommodate exports from emerging South Asian and other low-cost exporters.

Ding Jianping, "China's Foreign Exchange Black Market and Exchange Flight: Analysis of Exchange Rate Policy," pp. 24-44.

This paper studies the origin of China's foreign exchange black market, as well as the development of this market, through time-series analysis of the period between 1976 and 1996, with particular emphasis on 1985 (the first unification) and 1994 (the second unification). The model adapted in this paper is based on Pierre-Richard Agenor (1990) and Mitsuhiro Fukao (1984) to analyze the structure of China's exchange market and determinants of the black market exchange rate. The paper also analyzes the incentives for exchange flight. The deviation of the official rate from the black market rate suggests a shift of priority in China's exchange rate policy. A sudden complete devaluation of the official rate to market equilibrium (unification) has a negative effect on the black market premium in the short term, but none in the long run, as long as the market mechanism has not fully been established in China.

Peter Nolan and Wang Xiaoqiang, "The Chinese Army's Firm in Business : The Sanjiu Group," pp. 45-79.

China's rapid economic growth after 1978 provided opportunities for existing large plants to grow into more complex big businesses, stimulated especially by booming demand for their "upstream" products, such as steel, heavy machinery and petrochemicals. However, large firms emerged also from among the ranks of new entrants and small producers, especially in "downstream" sectors, where barriers to entry tended to be lower. The object of this study, the Sanjiu Group, only came into existence in 1987. By the early 1990s it had risen to become China's largest pharmaceutical firm and one of the top 100 firms in China. This paper analyses the nature and causes of Sanjiu's explosive growth. Sanjiu is owned by the Chinese Army. This paper analyses also the implications of this fact for theoretical debate over the relationship of property rights to firm performance in reforming communist economies.

Yoshimi Kuroda, "Empirical Investigation of the Rice Production Structure in Taiwan, 1976-93," pp. 80-100.

The objective of this paper is to quantitatively investigate the production technology of the rice industry in Taiwan for the period 1976-93. To achieve this objective, a system of translog variable cost function and factor share equations was adopted based on the extensive use of the data taken from the Survey Report on Rice Production Costs published annually by the Food Bureau. Some of the interesting findings are as follows: (1) technological progress in rice production has been fairly substantial; (2) technological change has been biased toward saving labor, and using intermediate inputs and capital, which was found to be consistent with the Hicksian induced innovation hypothesis; and (3) the shadow price of land has been considerably higher than the market land rent, implying that rice farmers would have been better off if they had produced rice themselves rather than renting out their lands.