Economics 342 Economic Development in the PRC (3) Spring 2001 Syllabus Frank R. Gunter – Associate Professor Economics Department, Lehigh University Lecture: Tuesday – Thursday, 10:45 AM – Noon Instructor Availability Office: Rauch Business Center, Room 470 Hours: Tuesday, 1:30 – 4 PM and by appointment Phone: (610) 758-4540 Fax: (610) 758-4677 E-mail: frg2@lehigh.edu Course Description Eco 342: Economic Development in the People’s Republic of China examines the economic, political and social forces at work in the development process in China since 1949. Special emphasis on post-1978 market reforms, the rural-urban divergence, th erole of foreign trade and investment, the accumulation of human capital, and the deterioration of the physical environment. Course concludes with a detailed discussion of possible futures of the Chinese economy. Reference Material World Bank (WB) ( 1997) China 2020, Washington D.C.: World Bank. (This work is in seven parts.) Joint Economic Committee (JEC) (1996) China’s Economic Future: Challenges to U.S. Policy, Washington D.C.: Government Printing Office. (Copies available in the Economics Department Office for $16.) Todaro, Michael P. (1999) Economic Development, Reading, Massachusetts: AddisonWesley. (Optional) Most of the remaining course readings are on reserve in the Fairchild Martindale Library. Course Schedule and Reading List Jan 16, 18 I. Introduction to PRC economy I.1China as a continent and a civilization Todaro pp. 251-254 2 Reynolds, Lloyd G. (1985) “China,” Economic Growth in the Third World, 1850-1980, New Haven: Yale University Press, Chapter 11, pp. 268-292. Riskin (1996) “Social Development, Quality of Life and the Environment,” JEC, pp. 361-380. Marshall, Alfred (1948) Principles of Economics, New York: MacMillan Company. Section #4, pp. 5-10. Edmonds, Richard L. (1999) “The People’s Republic of China after 50 Years,” China Quarterly, No. 159, September, pp. 563-568. O’Keefe, Hsu and William O’Keefe (1997) “Chinese and Western Behavior Differences: Understanding the Gaps,” International Journal of Social Economics, Vol. 24, No. 1-3, pp. 190-196. Confucius (1938) “Ethics and Politics,” in Lin Yutang (Ed.) Wisdom of Confucius Jan 23 II. Review of Eco Development Theory (Guest lecture by Professor Alvin Cohen, Professor Emeritus of Lehigh University.) Todaro Chap. 3 Jan 25 Overview of Information Resources on China (This class will be held in the Audio/Visual Room of the Fairchild-Martindale Library. Attendance is required.) Jan 30 II. Review of Eco Development Theory (continued) (Guest lecture by Professor Alvin Cohen, Professor Emeritus of Lehigh University.) Feb 1 Class cancelled. Feb 6, 8 III. History of the PRC Economy III.1Ancient Times through 1949 Lin, Justin Yifu (1995) “The Needham Puzzle: Why the Industrial Revolution Did Not Originate in China,” Economic Development and Cultural Change, Vol. 43, No. 2, January, pp. 269-292. Landes (1998) Chaps. 1, 2 and 21. III.2 The Communist Experiment: 1949-1978 Chinese Planned Economy Great Leap Forward Cultural Revolution Dernberger, Robert F. (1999) “The People’s Republic of China at 50: The Economy,” China Quarterly, No. 159, September, pp. 606-615. 3 Chang, Gene Hsin (1997) “Communal Dining and the Chinese Famine of 1958-1961,” Economic Development and Cultural Change, Vol. 46, No. 1, pp. 1-34. Feb 13 Pacing Break Feb 15, 20 III.3 Economic Liberalization: 1978-Current WB (1997) China 2020, Chap. 1-8. Naughton (1996) “Pattern and Logic of China’s Economic Reform,” JEC, pp. 1-10. Liebethal (1996) “Politics and Economics in China,” JEC, pp. 11-15. Wang (1996) “Some Historical Reflections on Chinese Economic Reforms,” JEC, pp. 16-23. Cheng (1996) “A Mid-course Assessment of China’s Economic Reform,” JEC, pp. 24-33. Gelb (1996) “China’s Reforms in the Wider Context of Transition,” JEC, pp. 86-100. Potter (1996) “Law Reform and China’s Emerging Market Economy,” JEC, pp. 221-242. Feb 22 Quiz Feb 27 & Mar 1 IV. The Recent Macroeconomics of PRC: 1978-Current IV.1 Measurement Issues Cai, Yongshun (2000) “Between State and Peasant: Local Cadres and Statistical Reporting in Rural China,” China Quarterly, No. 163, September, pp. 783-805. IV.2 Sources Economic Growth Todaro Chap. 4 Sachs and Woo (1996) “Chinese Economic Growth,” JEC, pp. 70-85. Borensztein, Eduardo and Jonathon D. Ostry, “Accounting for China’s Growth Performance,” American Economic Review, Vol. 86, No. 2, (1996), pp. 224-228. Chow, Gregory C., “Challenges of China’s Economic System for Economic Theory,” American Economic Review, Vol. 87, No. 2, (1997), pp. 321-327. Hu, Zuliu F. and Mohsin S. Khan, "Why is China Growing So Fast," IMF Staff Papers, Vol. 44, No. 1, (1997), pp. 103-131. Krugman, Paul, "The Myth of Asia's Miracle," Foreign Affairs, Vol. 73, No. 6, (1994), pp. 62-78. United Bank of Switzerland, “The Asian Economic Miracle," UBS International Finance, Issue 29, (1996), pp. 1-8. 4 Young, Alwyn, "Lessons from the East Asian NICS: A Contrarian View," European Economic Review, Vol. 38, (1994), pp. 964-973. IV.3 Inflation IV.4 Poverty and Unemployment Todaro Chap. 5 Yao, Shujie (2000) “Economic Development and Poverty Reduction in China over 20 Years of Reform,” Economic Development and Cultural Change, Vol. 48, No. 3, pp. 447-474. IV.5 Balance of Payments Todaro Chap. 12-14 WB (1997) Sharing Rising Incomes, Chap. 1-4 Dernberger (1996) “China’s Transformation to a Market Economy,” JEC, pp. 57-69. V. Sectors of the PRC Economy Mar 6 V.1 Agriculture and Rural Life Todaro Chap. 10 WB (1997) At China’s Table, Chap. 1-5 Crook (1996) “An Assessment of China’s Agricultural Economy: 19802005,” JEC, pp. 124-138. Carter and Rozelle (1996) “How Far Along is China in Developing its Food Markets,” JEC, pp. 139-161. Oi, Jean C. (1999) “Two Decades of Rural Reform in China: An Overview and Assessment,” China Quarterly, No. 159, September, pp. 616628. Rozelle, Scott; Albert Park; Jikun Huang; and Hehui Jin (2000) “Bureaucrat to Entrepreneur: The Changing Role of the State in China’s Grain Economy,” Economic Development and Cultural Change, pp. 227-252. Guo, Xuguang; Thomas Mroz, and Barry Popkin (2000) “Structural Change in the Impact of Income on Food Consumption in China, 1989-1993,” Economic Development and Cultural Change, Vol. 48, No. 4, July, pp. 737-760. Mar 8 V.2 Industrial Sector - SOE/TVE/Private Firms Woo (1996) “Crises and Institutional Evolution in China’s Industrial Sector,” JEC, pp. 162-175. Jefferson and Singh (1996) “Ownership Reform as a Process of Creative Reduction in Chinese Industry,” JEC, pp. 176-202. Koo and Yeh (1996) “The Impact of TVE Growth on State Enterprises Reform,” JEC, pp. 381-402. Li, Wei (1997) “The Impact of Economic Reform on the Performance of Chinese State Enterprises, 1980-1989,” Journal of Political Economy, Vol. 105, No. 5, pp. 1080-1106. 5 Wu, Yanrui (1993) “Productive Efficiency in Chinese Industry,” AsianPacific Economic Literature, Vol. 7, No. 2, November, pp. 58-66. Szirmai, Adam and Ren Ruoen (2000) “Comparative Performance in Chinese Manufacturing, 1980-1992,” China Economic Review, Vol. 11, No. 1, pp. 16-53. Mar 13, 15 Spring Break Mar 20 V.3 Financial Intermediation in the PRC Cheng, Fong and Mayer (1996) “China’s Financial Reform and Monetary Policy,” JEC, pp. 203-220. Xu, Cheng Kenneth (2000) “The Microstructure of the Chinese Stock Market,” China Economic Review, Vol. 11, No. 1, pp. 79-97. Mar 22 V.4 Infrastructure Szymanski (1996) “The New Revolution in China: Telecommunications and Societal Change,” JEC, pp. 270-279. Colton and Morison (1996) “Chinese Transportation System,” JEC, pp. 280-319. Mar 27 V.5 International Trade and Capital Flows WB (1997) China Engaged, Chap. 1-4 Perkins (1996) “Prospects for China’s Integration into the Global Economy,” JEC, pp. 34-40. Lilley and Hart (1996) “Greater China,” JEC, pp. 423-450. Holliday (1996) “China and the World Trade Organization,” JEC, pp. 451469. Morrison and Hardt (1996) “Sino-U.S. Economic Relations into the 21st Century,” JEC pp. 471-498. Watson, James (2000) “China’s Big Mac Attack,” Foreign Affairs, Vol. 79, No. 3, May/June, pp. 120-134. Gunter, Frank R., "Capital Flight from the People's Republic of China: 1984-1994," China Economic Review, Vol. 7, No. 1, (1996), pp. 77-96. Mar 29 V.6 Services and Government WB (1997) Financing Health Care, Chap. 1-8 Rask, Kolleen; David Chu; and Thomas Gottschang (1998) “Institutional Change in Transitional Economies: The Case of Accounting in China,” Comparative Economic Studies, Vol. XXXX, No. 4, Winter, pp. 76-100. Gamble, William (2000) “The Middle Kingdom Runs Dry,” Foreign Affairs, Vol. 79, No. 6, November/December, pp. 16 -20. 6 Apr 3 VI. Economic Decision Making in the PRC VI.1 Delegation-Consensus Todaro Chap. 16, 17 Lieberthal, Kenneth (1995) Governing China, New York: W.W. Norton Inc. Shirk, Susan L. (1993) “Decision Rules,” Chapter 7, and “Chinese Political Institutions and the Path of Economic Reforms,” Chapter 8, in Political Logic of Economic Reform in China, Berkeley: University of California Press, pp. 116-145. Yusuf, Shahid (1994) “China’s Macroeconomic Performance and Management During Transition,” Journal of Economic Perspectives, Vol. 8, No. 2, Spring, pp. 71-92. VII. Challenges to Future Economic Development Apr 5 VII.1 Energy Shortages Sinton, Fridley and Dorian (1996) “China’s Energy Future,” JEC, pp. 243269. Apr 10 VII.2 Environmental Deterioration Todaro Chap. 11 WB (1997) Clear Water, Blue Skies, Chap. 1-8 Edmonds, Richard L. (1999) “The Environment in the People’s Republic of China 50 Years On,” China Quarterly, No. 159, September, pp. 640-649. U.S. Embassy Beijing (2000) “The Cost of Environmental Degradation in China,” Mimeo, December. Apr 12 Easter Break Apr 17 VII.3 Population Growth and Rural-Urban Migration Todaro Chaps 6 & 866 Banister (1996) “China: Population Dynamics and Economic Implications,” JEC, pp. 339-360. WB (1997) Old Age Security, Chap. 1-4. Hussain, Athar, “Social Security in Present Day China and Its Reform,” American Economic Review, Vol. 84, No. 2, (1994), pp. 276-280. Apr 19 VII.4 Bureaucracy and Corruption Fan, C. Simon and Herschel I. Grossman (2000) “Incentives and Corruption in Chinese Economic Reform,” Mimeo, Lingnan College, March. Johnston, Michael, “The Vices--and Virtues--of Corruption,” Current History, Vol. 96, No. 611, (1997), pp. 270-273. Kaufmann, Daniel, "Corruption: The Facts," Foreign Policy, Summer, (1997), pp. 114-131. 7 Transparency International and Gottingen University (1997) "Internet Corruption Perception Index - 1997," Internet: http://www1.gwdg.de/~uwvw/rank-96.htm Ding, X.L. (2000) “Systematic Irregularity and Spontaneous Property Transformation in the Chinese Financial System,” China Quarterly, No. 163, September, pp. 655-676. Bernstein, Thomas and Xiaobo Lu (2000) “Taxation without Representation,” China Quarterly, No. 163, September, pp. 742763. Feinerman, James V. (1997) “The Rule of Law...with Chinese Socialist Characteristics,” Current History, Vol. 96, No. 611, pp. 278-281. Ehrlich, Isaac, and Francis T. Lui (1999) “Bureaucratic Corruption and Endogenous Growth,” Journal of Political Economy, Vol. 107, No. 6, Pt. 2, pp. S270-S293. Apr 24 VII.5 Animosity Gladney, Dru C. (1997) “Rumblings from the Uyghur,” Current History, Vol. 96, No. 611, pp. 287-290. Todaro Chap. 6, 8, 11 Apr 26 & May 1, 3 VIII. China 2020 VIII.1 Scenarios of Economic Development VIII.2 Political Implications of Economic Development VIII.3 Impact on China's Neighbors and the World Todaro Chap 18 Singh and Singh (1996) “Economic Prospects to 2010,” JEC, pp. 101-123. Baum, Richard, “China After Deng: Ten Scenarios in Search of Reality,” China Quarterly, No. 145 (1996), pp. 153-175. Lardy, Nicholas, “China’s Economic Prospects,” in Hans Binnendijk and Ronald N. Montaperto (eds.), Strategic Trends in China, (Washington DC: National Defense University, 1998), pp. 33-37. De Mesquita, Bruce Bueno and Yi Feng (1997) “Forecasting China’s Political and Economic Future,” Problems of Post-Communism, Vol. 44, No. 2, pp. 14-27. Lardy, Nicholas, “China’s Economic Prospects,” in Hans Binnendijk and Ronald N. Montaperto (eds.), Strategic Trends in China, (Washington DC: National Defense University, 1998), pp. 33-37. Student Evaluation Quiz (Feb 22) 20% of grade Seminar 25% of grade Participation 20% of grade Final Exam 35% of grade 8 Each student will participate in a three-hour seminar on a topic associated with Chinese economic development. Successful seminar participation will require significant preparation. There is no make-up exam for the Quiz. If you have an excused absence for the Quiz then your final will count for 55% of your semester grade. On the last day of class or at least ten days before your final exam, I will hand out a list of ten essay questions. During the final exam you will be required to write answers to three or four of these ten questions. Since you will know the questions in advance, they may be of fiendish difficulty. Do not wait until the questions have been distributed before you begin to study. I will not answer any questions about the economics of China after I have handed out the ten potential final exam questions. Participation means more than just attendance in class. The Information Resources Session on China on Jan 25th will count for one quarter of your participation grade (5% of your final grade.) In addition, you should have completed at least the relevant “star” readings before each class begins and be ready to engage in classroom discussions. In addition, there will probably be one or more afternoon or evening talks on issues related to Chinese economic development during the course of the semester and your attendance and participation is these talks may be required.