Interpreting China’s Performance With a Russian Perspective
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Interpreting China’s Performance With a Russian Perspective Yukon Huang Carnegie Endowment
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Interpreting China’s Performance With a Russian Perspective . Yukon Huang Carnegie Endowment. Similarities. Differences. Three Key Policy Differences. Agglomeration and manufactures trade Innovation and productivity increases Vested interests and state capture. - PowerPoint PPT Presentation
Transcript of Interpreting China’s Performance With a Russian Perspective
Interpreting China’s Performance With a Russian Perspective
Yukon Huang Carnegie Endowment
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SimilaritiesRussia China
Transition from planned economy
YES YES
Size Largest land mass Largest population
Large Trade Surplus $ 200 billion (2011) $180 billion (2012 E)
Exports as % of GDP(recent averages)
35% 35%
Labor productivity (VA per worker 2005)
$7000 $7000
Massive Internal Migration
East to West West to East
Inequality (Gini coefficient)
Rose from 25 to 45 Rose from 25 to 45
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DifferencesRussia China
Agrarian labor share of total
10% 40%
Source of growth Capacity utilization and energy prices
Investment and industrial expansion
Resource based share of exports
80% 3%
Manufactures share of exports
15% 90%
Investment as % of GDP (2011)
22% 47%
GDP Growth (%) Past Decade: 5%Future: 3-4%
Past Decade: 10%Future: 7-8%
Three Key Policy Differences
• Agglomeration and manufactures trade
• Innovation and productivity increases
• Vested interests and state capture
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(1) Economic activity is concentrated in Asia
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Massive migration of labor to the coast spurs concentration
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China – location of globalized industries
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China – location of domestic oriented industries
99
High investment rates coupled with spatial agglomeration effects increased labor productivity
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-6
-4
-2
0
2
4
6
8
10
10 15 20 25 30 35 40
Labor Productivity Growth (%), 1980-2005
Investment to Output Ratio (%)
China
China and Russia – Comparison of World Bank’s Business Environment Rankings
CHINA RUSSIA
Ease of doing business 91 120
Starting a business 151 111
Construction permits 179 178
Registering property 40 45
Getting credit 67 98
Protecting investors 97 111
Paying taxes 122 105
Trading across borders 60 160
Enforcing contracts 16 13
Resolving insolvency 75 60
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Investment climate: administrative and transactions costs as a percent of sales
Russia China
Bribes 1.5 2.0
Infrastructure problems
6.5 2.5
Security, theft protection
3.5 1.5
Supply delays 1.0 1.5
Total 12.5 7.5
Regional Trade – specialized components, strong logistics and scale economies
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Processing trade drives China’s trade surplus
-40
-30
-20
-10
0
10
20
30
40
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Processing trade
Normal trade
Trade balance (RMB bn)
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Russia and China – relations with global community
• Differing productive structures limits growth prospects for Russia but provides flexibility for China.
• China will continue to shape global market for manufactures – more in terms of variety than in just lower costs.
• Russia will continue to be largely an energy/mineral supplier and vulnerable to price fluctuations.
• This has political implications for how they will relate to the international community.
• China needs good relationships given its dependency on the broader global market for its goods. Russia sees itself as an energy exporter to captive markets and thus less dependent on favorable relationships.
(2) Innovation must drive China’s future growth
• Future growth should come more from innovation.• But innovation needs to be private sector driven in
comparison with the past state led investment approach.• By 2030, China will have 200 million college graduates, more
than the entire workforce in US but skills are deficient.• R&D spending is rising rapidly but reliance on government
support is a concern. Patents are soaring but value unclear.• Some firms are getting closer to the technological frontier but
overall production mix is still not technologically advanced. • Big question can China leapfrog beyond its “natural” position
and develop more indigenous technology?
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China and East Asian economies are innovating no more than comparators at similar income levels
(ranking)
But China really stands out in terms of adoption of technology
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Global R&D Landscape
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(3) Vested Interests and State Capture
• Russia – state capture by financial-industrial groups and a dominant leader. Influenced by “dutch disease” and resource rich governance vulnerabilities.
• China – shifting from a broad coalition of growth advocates to state capture by the Party/State Banks/SOEs. State led rapid growth has generated abundant rent-seeking opportunities.
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