Essays on the Chinese economy in the 1980's

The economic reform in the 1980's has shifted China from an extremely centralized planning economy to a decentralized mixed economy. Reform and decentralization have vitalized China's economy. But they also produced problems for the government in the key areas of state enterprises, government finance, and the role of foreign trade in economic development. Interpretation and analysis of these problems are often controversial in the literature. This dissertation provides four essays that investigate some of the problems.; The Chinese government used profit-rate indices to measure the performance of state enterprises before economic reform, but it allowed state enterprises to pursue total profit instead in the 1980's. The first essay examines the economic implication of this shift. Before economic reform, the government required state enterprises to remit all profits to the state budget. In the 1980's, it introduced several programs to share profit with state enterprises as an incentive mechanism. The working of the incentive mechanism is studied in the second essay.; Because the Chinese enterprises not only served as production units but also provided employees with housing, school, hospital, and other benefits, and because of its "full employment" policy, the government has bailed out many money-losing state enterprise. The cost of such a bailout policy has been a growing budget deficit, and how to finance the budget deficit was a major problem faced by the Chinese government in the 1980's. The third essay studies the feasible policies available to the government in financing its budget deficit.; In the fourth essay, a model that emphasizes the positive role of importing technology-embodied intermediate goods on the domestic economy is developed. The effect of the growth of China's exports, imports of intermediate goods, and foreign trade on the growth of national income is then empirically estimated by using this model.