China Development Strategy

8/4/2019 China Development Strategy

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1

Chinas development

strategy

Lan Xue and

Peter Sheehan

1

In the latter part of the 1990s the discussion of the knowledge economy became

very intense in China, as a perception arose that Chinas continuing developmentwould take place in a quite new world. This discussion was vigorous and influen-

tial at the highest level, but became increasingly diffuse, as different participants

used concepts in very different ways and came to quite different conclusions. The

relevance of the concept of the knowledge economy to the quite specific circum-

stances of China also began to be questioned.

The essays in this volume express this diversity of viewpoints and approaches,

as well as the need to explore the relevance of the knowledge economy to Chinas

situation. By bringing together the work of a range of distinguished Chinese

scholars, leading authorities from the OECD and the World Bank, and authorsfrom Australia and several other countries, we aim to illuminate many different

aspects of this important topic.

This introductory chapter does not seek to summarise or review the individual

papers assembled here the introductions to each part of the book provide sum-

mary information for the interested reader. Rather we set out to address briefly

some of the key questions that have arisen within the Chinese debate, and in

particular to explore the relevance of the knowledge economy to Chinas develop-

ment strategy.

Our central argument is that the knowledge economy, as we interpret it, is of

decisive importance for China. This is because the knowledge economy will provide

a fundamentally different global context for Chinas development, one very

different from the context of recent decades and far removed from that in which


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2 Chinas future in the knowledge econony

the developed countries, and even the East Asian Tigers, achieved sustained

growth. This quite new context means, for example, that the traditional develop-

ment strategy based on industrialisation will not be sufficient, as global manu-

facturing becomes highly productive, intensely competitive and providing an ever

smaller share of total employment. It also means that Chinas response to the

knowledge economy will not simply involve a progressive adaptation to the

institutions, systems and policies prevailing in advanced countries and forged in

the industrial era.

New and distinctive approaches to development strategy, which take account of

both Chinas specific circumstances and the new global realities, need to be

thought out as a matter of urgency. Such approaches will require, in our view,

new emphases in a number of areas. These may include directly stimulating

service sector growth; giving priority to employment growth rather than toincreases in output or productivity, and to new product and quality-enhancing

process technologies rather than to labour-saving new process technologies; and

improving rural output and related activities to enable continued high levels of

employment in rural areas.

The development strategies appropriate for the knowledge economy are not yet

understood, certainly not by the present authors. It is our hope that the various

papers in this book, with their diversity of approaches and author backgrounds,

may contr ibute to building such an understanding. In this way they may assist in

addressing the fundamental challenge, facing both China and other developingcountries, of reshaping their strategies to come to grips with the emerging

reality of the knowledge economy.

1. Knowledge economy fever

Background

Starting in April 1997, a fever of knowledge economy discussion swept China,

with the publication of the Chinese version of the OECD report The Knowledge-based Economy (OECD 1997) and other related writings, includingAustralia and

the Knowledge Economy (Sheehan et al. 1997). From the president of the nation

to the ordinary citizen, from the dynamic Pearl River Delta to the vast yellow

plateau in the west, people engaged in energetic discussions and debates on ques-

tions related to the knowledge economy. These debates and discussions were

influenced and shaped by the events that followed, which included, among many

others:

the submission of the report by the Chinese Academy of Sciences (CAS) on

Knowledge Innovation to Chinas leadership, and the subsequent approval of

the Academys Knowledge Innovation Project;

the Asian financial crisis and its impact;

the rise and fall of the Internet economy;


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Chinas development strategy 3

the backlash about globalisation in many countries; and

the agreement for China to join the World Trade Organisation (WTO).

To some people, the concept of the knowledge economy means a new economic

paradigm, while to others it signifies an entirely new social transformation of

which the economy is only a part. There are also disagreements about the simi-

larities and differences between the concept of the knowledge economy and other

concepts, such as the information economy, the new economy and the networked

economy. Another major debate is about whether it is too early for China to even

talk about the knowledge economy, given that the industrial economy of China is

still in its early development stage.

While all these discussions and debates proceeded, China also felt compelled to

put words into action. With the support of the government, the Chinese Academy

of Sciences started a program named Knowledge Innovation, aimed at restruc-turing the more than one hundred research institutes for which it is responsible

and making them more effective and efficient in knowledge generation and

application. The Ministry of Education has also initiated a program to revitalise

Chinas education system to prepare for the challenges of the knowledge economy

in the new century. More generally, theDecision on Encouraging Technological

Innovation, Developing High-Tech Industry and Realising Commercialisation of

New Technologies taken by the CPC Central Committee and the State Council in

1999 was an example of a high level response to these matters.

Issues of concern

During these debates, and the initial responses to which they have given rise,

three sets of issues have been of continuing concern, as outlined below.

The first set of issues is at the conceptual level. What is the knowledge econ-

omy? Is it a vision for development that can be implemented and realised, or is it

an abstract theoretical concept that should remain in the domain of academia

only? What is the new economy? What is the networked economy? What are the

differences and relationships between the knowledge economy, the new economy,

and the network economy? What is the relationship between the knowledge

economy and the globalisation of the world economy? Does the new economy still

follow traditional economic principles? What are the new rules or principles of

the knowledge economy, if there are any such?

The second set of issues relates to the relevance of the knowledge economy to

China. Why is China so concerned with the concept of the knowledge economy

when it is only now making the transition from an agricultural economy to an

industrial economy? The knowledge economy has often been presented as one

based on a strong science and technology base and on high-tech industries. Given

that China is still lagging behind in these areas and is struggling to provide jobs

for its huge working population, does it make sense to talk about a knowledge

economy? Should China not focus on labour-intensive industries instead? What

is the difference between the knowledge economy and invigorating China


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through science and education (one of the two basic strategies proposed by the

Chinese leadership in 1995)? If the two are essentially the same, why bother to

introduce something new to confuse people?

The third set of concerns questions of implementation. Is the idea of the know-

ledge economy a concept, a theory, or an action plan? How does the concept or

theory guide our action? What are the specific and concrete ideas to implement

the concept of the knowledge economy besides more investment in science,

technology and education? Is it possible to strive for a knowledge economy and

society in some parts of a country but not in the others? Given that the know-

ledge economy is often associated with high-tech and information industries,

what are the implications of the knowledge economy for traditional industry?

It is not possible in this chapter to address all of these important questions

directly. Many of them are taken up, in one way or another, in the other papersin this volume. But we undertake two tasks to give an answer to some of them.

First, we outline an overall approach to the knowledge economy, addressing the

conceptual issues in a way consistent with the bulk of the international literature.

This material is intended to provide a framework in which the relevance and

implementation issues can be addressed. In the remainder of this chapter, we

explore one issue that goes to the heart of such questions the implications of

the knowledge economy for Chinas development strategy.

2. Conceptual issues

To outline a preferred view of the knowledge economy, we start with the key con-

ceptual questions noted above. Clearly concepts can be introduced and defined in

different ways, and there is no absolute answer to these questions. But we outline

below the conceptual approach that, in our view, is both most useful and most

consistent with the best work that has been done in this area.

The concept of the global knowledge economy

The technological and policy realities of the modern world are driving the emer-gence of a quite new set of activities, structures and arrangements in the global

economy. Here we follow OECD (1996) and other authors in describing this

emerging set of activities, structures and arrangements as a knowledge-based

economy, and often use the term the global knowledge economy (see also World

Bank 1998, and Sheehan and Tegart 1998).

The central technological facts leading to the global knowledge economy derive

from the revolution in information technology. They include the ability to deliver

codified knowledge, assembled on a global basis if necessary, very quickly and

very cheaply to the area where it is needed, to transform such knowledge exten-

sively as required and to make it effective in machines and other production

and service delivery processes. The central policy fact is the global trend to the

deregulation of the flow of goods, capital, technology and services, and of national


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processes of production and distribution. The entry of China into the WTO, and

the policy responses within China to prepare for this entry, are examples of this

policy dynamic at work.

These two factors have had mutually reinforcing effects, and many other forces

are also contributing to shaping the new global economy. The term global knowl-

edge economy makes explicit reference to what we take to be the defining

characteristics of the world economy emerging as a result of these causal factors:

the rise in the knowledge intensity of economic activities and the increasing

globalisation of economic affairs. But this term is intended to refer to the overall

economic system that is emerging, rather than to these characteristics alone.

Thus, as we use the term, the global knowledge economy is neither a purely

theoretical concept nor a vision of development for China. It is a descriptive

concept seeking to express the central reality of the current stage of global eco-nomic development. In our view, and that of many others, the world economy is

moving from the industrial era to become a global knowledge economy. Nations,

whether rich or poor, large or small, need to respond to th is emerging reality, and

to shape their development strategies having regard to it.

One defining feature of the global knowledge economy is the growing incorpor-

ation of knowledge into economic activities involving both goods and services.

Knowledge becomes incorporated in productive activities in many different ways,

ranging from learning by doing by operators on the shop-floor to formal processes

of knowledge generation and application, of training and of investment inadvanced equipment. The economic value of a typical knowledge-intensive good

an advanced aircraft, a drug, a computer or a smart card goes far beyond

the value of the materials of which it is composed, in virtue of the knowledge

embodied in the product. Similarly, services such as medical diagnosis and treat-

ment, education and training, and business consulting rely heavily on embodied

knowledge.

The second defining feature is equally important: the rapid globalisation of eco-

nomic activities. The extraordinary pace of globalisation over the last decade or

so has reflected the intertwined effects of both policy change and developments

in information technology, with the computing and communications revolution

providing the basic infrastructure necessary for rapid globalisation to occur.

The process of globalisation has not involved by any means only increased trade

in goods, although this is of great importance. Indeed, there are at least five

matters involved in globalisation: foreign direct investment, capital transfers

other than direct investment, t rade flows of goods and of services, and knowledge

and technology transfers (Hatzichronoglou 1996). These aspects of globalisation

are of course interrelated. For example, the links between direct investment,

technology transfers and the various trade flows will often be particularly close,

and the growing interrelationship between trade, finance and technology flows is

itself a significant feature of the process of globalisation. Other features include

the existence in all major markets of global competition between competitors


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from all major countries, the increasingly multinational origin of the inputs to

production of both goods and services, and the growth of trade between countr ies

within the same industry and indeed in the same product.

So the answers that we propose to some of the questions about the knowledge

economy noted above are as follows. The global knowledge economy is a new set

of activities, structures and arrangements that is evolving on a global basis, as a

result of the combined influence of the information technology revolution and

sustained policy initiatives to promote openness and deregulation. As such it

represents a new stage of the world economy, subsequent to and in key respects

different from that of the industrial era.

The knowledge economy refers to the new overall structure that is emerging,

together with its associated institutions, activities and arrangements. Attention is

often given to individual aspects of the emerging economy, such as the neweconomy or the online economy, the network economy, the learning economy

and the information economy. But these are specific aspects rather than the overall

reality. The Internet plays an important part in the knowledge economy, and

networks of many different types are also vital. Learning is clearly central to a

knowledge economy, as is the rapid exchange of information and other forms of

knowledge. Innovation, being the process of applying ideas new to the firm in

many different areas, is clearly at the heart of a vibrant knowledge economy. Each

of these concepts views the overall reality of the knowledge economy through a

different lens, thereby illuminating an important part of the picture.The rise of the industrial economy had a major impact, whether for good or ill,

on all countries, radically reshaping the position of nations and the lives of indi-

viduals. Similarly, the knowledge economy will have profound and pervasive

implications, in ways that we cannot yet fully comprehend.

The changing nature of manufacturing

It is not possible here to discuss the many and varied characteristics of the

global knowledge economy. Given our emphasis on implications for Chinas

development strategy, and the focus of that strategy to date on manufacturing, we

explore briefly the changing nature of manufacturing in the knowledge economy.

These matters are discussed further in Chapter 4 in this volume.

Perhaps the most obvious feature of contemporary manufacturing is the con-

tinuing rapid rise in labour productivity , measured as value added per employee.

Reflecting new process technologies, increasing capital intensity and the pres-

sures of global competition, real manufacturing productivity in the major

economies has grown at about 3.5 per cent per annum since 1970, a rate at which

it doubles every 20 years. In Japan, for example, productivity in manufacturing

grew by 3.6 per cent per annum between 1970 and 1998, in spite of much slower

growth in the drawn-out Japanese recession of the 1990s (OECD 2002). Indeed,

between 1970 and 1991 the growth rate was 4.2 per cent per annum. In the USA

real manufacturing productivity grew by 3.3 per cent between 1977 and 1999,


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with more rapid growth in the 1990s between 1992 and 1999 the growth rate

was 4.6 per cent, a rate at which productivity doubles every 16 years (OECD

2002). By 1999 value added per head in US manufacturing was US$80 000 per

employee in current prices.

This continuing rapid rise in productivity explains why, in developed countr ies,

manufacturing remains central to economic growth in spite of providing a

declining share of total employment. This continued importance is linked to two

other features manufacturing firms are becoming increasingly embedded in

global systems for the creation, production and distribution of goods and manu-

facturing is becoming increasingly integrated with knowledge-intensive services.

Many so-called manufacturing firms are now focused on creating products to

meet identified market demand, and on delivering those products to specific

markets at an appropriate time, place, quality and cost. Given rising productivityand advanced process technologies, the actual production stage is a declining

share of overall value added. Even within pure production companies, the demand

for tradesmen and production workers has fallen relative to that for knowledge-

intensive services such as accountants, process controllers, IT specialists and

managers.

As argued in Chapter 4, these developments may have profound implications

for developing countries such as China. As manufacturing becomes further

integrated with related service-based activities in a global system, it will be

increasingly difficult to separate high-value manufacturing geographically fromits related services. Low-value manufacturing, involving mass production of

standardised items and assembly operations, is being outsourced on a competi-

tive global basis to low-cost locations, as evidenced in the transfer of much of

Hong Kongs final production to Guangdong during the 1990s (Berger and Lester

1997). Such transfer of low-value manufacturing to other areas of China has

accelerated in the last few years, generating hopes that China is becoming the

global manufacturing centre. But higher value, flexible and service-enhanced

manufacturing must be located where it can be integrated with its related services.

Hence it is more likely to be located where there are highly developed service

industr ies, where the customers are, or where there are highly developed infor-

mation and communication technology and transport and distribution systems.

Given these trends, and the progressive opening of world markets, it is becom-

ing increasingly difficult for developing countries to base their development

strategies on globally oriented manufacturing in the knowledge economy. And

even if they succeed, as China has done to date, the pay-off in terms of employ-

ment growth in manufacturing is likely to be modest.

3. Three views of the impact on strategy

In the debate about the knowledge economy and Chinas development strategy, it

is possible to distinguish three broad views. One might be described as the


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irrelevance view: talk of the knowledge economy and of high-tech industrial

development is a dangerous distraction from the central challenges facing China,

that of increasing output and employment in low-tech industries where China

can be competit ive because of low costs. Knowledge economy fever, a disease to

which scient ific and policy elites are part icularly susceptible, can divert attention

from the mundane tasks involved in increasing output and employment in a still

relatively poor economy. It is thus irrelevant to the central issues facing Chinas

development. While this view is often expressed in informal discussions and often

generates intense debates within China, one can rarely find explicit elaboration

of it in open literature in China.

The second view might be described as the enhanced industrial economy view:

the knowledge economy is an enhanced state of the industrial economy, one in

which the roles of knowledge and of global competition are greatly enhanced. Asuccessful knowledge economy is one that fosters effectively the creation and

acquisition of knowledge, and its application to all aspects of economic and social

life. But there is no fundamental change, the knowledge economy being simply

an intensification of processes long under way in the industrial economy. The

broad implication is that China needs upgraded knowledge and skills, especially in

manufacturing and agriculture, and to increase productivity. Hence China

needs to move towards the systems and structures that have proven effective in

advanced economies, and to develop their innovation systems in this direction

over time. A relatively well-defined path is available from the experience ofother nations, and policies are necessary to move vigorously along these paths.

A representative example of this view is the important World Bank publication

China and the Knowledge Economy: Seizing the 21st Century (World Bank

2001).

The third view might be described as the global transformation view: that the

knowledge economy represents a fundamental change in the structure and

character of the global economy, one potentially as profound as the original

Industrial Revolution. Thus the strategies appropriate for China and other develop-

ing countries in this new world might be quite different from those successful in

the developed countries and in the rapidly industrialising economies of East

Asian. These strategies need to be thought out anew in the light of both

emerging global trends and the particular characteristics of China. There is no

guarantee that traditional development paths will give acceptable results in the

knowledge economy. A number of the authors represented in this volume

explicitly or implicitly subscribe to this view.

It will be apparent from the discussion above that we hold that the irrelevance

view is not correct. The knowledge economy is not code for high-tech industries,

but is a pervasive transformation affecting every region and all industries. The

clothing and textiles industries provide a good example. Complex processes

involving global flows of technology, design and marketing information, and the

segmentation of product systems are reshaping these industries. The scope for


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capturing significant valued added within the clothing and textile industries by

competition based on low costs is declining rapidly.

As a result, it is not a viable option for individual countries to ignore the

knowledge economy and to pursue growth in the industries in which they are

cur ren tly cost competitive. The forces of the knowledge economy are transform-

ing those very industries, and the basis of competitiveness within them. Even so,

the concerns that drive the irrelevance view the critical importance of the

employment issue and of low-tech industries in China, and its limited position in

advanced industries remain of central importance. The knowledge economy is

the essential global context within which Chinas development will proceed, but

it is not an excuse for ignoring the basic realities of Chinas situation.

In the remainder of this chapter we explore the issue of whether an enhanced

industrial strategy is viable for China in the emerging knowledge economy, orwhether the more comprehensive redirection of development strategy suggested

by the global transformation view is necessary. To provide the background neces-

sary to address this issue, we document the basic arithmetic of Chinas develop-

ment in the next section.

4. The simple arithmetic of Chinas development

One of the best-known features of Chinas development since the beginning of the

reform movement in 1979 is the very high rates of growth in real GDP whichhave been achieved. As shown in Table 1.1, the average annual rate of growth of

Chinas real GDP was close to 10 per cent in both the 1980s and the 1990s, almost

double the growth rate in the pre-reform decade of the 1970s. Sustained growth

rates of 10 per cent per annum for two decades are comparable with the very best

rates achieved in the countries of the East Asian Miracle, and in stark contrast

to falling levels of real GDP in many transition economies in Eastern Europe

over much of this period. Growth in China moderated during the 1990s, but still

averaged 8.3 per cent per annum between 1995 and 2000. There has been some

questioning of, and a good deal of discussion about, the accuracy of the officialfigures showing these high growth rates (e.g. Maddison 1998; Xu 1999; Rawski

2001). But the responses that have been generated seem to indicate that the high

growth is in large part credible, and our argument is not sensitive to modest

revisions in the official figures.

Real GDP, employment and productivity, by sector

The composition of this growth by broad economic sector1 is also shown in Table

1 In terms of definitions of the sectors, we follow the National Bureau of Statistics of China,although using slightly different terms to designate the three sectors. Thus agricultureincludes farming, forestry, animal husbandry and fishing. Industry is broadly defined tocover mining, manufactur ing, the production and supply of electr icity, gas and water, andconstruction. All other industries are included in services.


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1.1. The National Bureau of Statistics publishes data for real growth rates in GDP

(in total and for the sectors) in comparable prices, which involves valuing year

2s net value added in terms of year 1s prices, and so on, on a rolling basis. To

obtain data series expressed in yuan, we have applied (both backwards and

forwards) the published set of annual growth rates to the actual GDP values in

yuan for 1990, to obtain numerical values for GDP and its sectoral components

in estimated 1990 values. (It should be noted that these are not estimates in

1990 prices in the standard sense, namely that each years output has been valued

in the prices of 1990.)

The growth of Chinas GDP has been increasingly dominated by industry, of

which manufacturing is the major component. During the 1980s industrial GDP

grew by 10.6 per cent per annum, and contributed 55 per cent of total real GDP

growth; in the 1990s it grew at 13.6 per cent per annum and contr ibuted 62 percent of total GDP growth. By 2000 industry accounted for 56.5 per cent of GDP.

But the service sector also grew strongly (at 12.6% and 9.1% per annum in the

two decades respectively) and contributed 28 per cent of real GDP by 2000.

While these growth rates are remarkable, even more striking is the fact that in

the 1990s it took 10.1 per cent per annum growth in real GDP to generate only

1.1 per cent growth in employment (Table 1.2), implying overall labour produc-

tivity growth of just on 9 per cent per annum (Table 1.3). In this decade real

industrial GDP increased by 13.6 per cent per annum, but industrial employment

increased by only 1.6 per cent per annum. Employment in agriculture fell by 7.4per cent or 28.4 million over the decade. Thus in this decade China experienced

something close to jobless growth, a phenomenon much discussed in relation to

the developed countries, and a potentially serious issue in a country with such a

massive labour force.

Table 1.1 Real GDP, by sector (estimated 1990 values), 19702000

Agriculture Industry Services Total(100 bil lion yuan, at 1990 values)

1970 2.5 1.2 1.0 4.61980 3.0 2.8 1.8 7.61985 4.3 4.4 3.2 11.91989 4.9 7.4 5.5 17.81990 5.0 7.7 5.8 18.51995 6.1 17.2 9.4 32.72000 7.3 27.5 13.8 48.7Annual growth rates (per cent per annum)197080 2.0 9.1 6.0 5.1

198090 5.3 10.6 12.6 9.319902000 3.8 13.6 9.1 10.1199095 4.2 17.4 10.0 12.019952000 3.5 9.8 8.2 8.3

Sources:National Bureau of Statistics 2001 and estimates of the authors.


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The contrast between the 1970s and the 1990s in this regard is striking

growth in real GDP in the 1970s (5.1%) was only half that in the 1990s, but

employment growth (2.1%) was almost twice the 1990s rate. The difference is, of

course, to be found in the rate of productivity growth, which underpinned the

rapid growth in living standards in the 1990s.

This trend towards jobless growth was in some respect more pronounced in the

second half of the 1990s, as the superheated growth of the first half of the decadeslowed significantly. With real GDP growth of 8.3 per cent per annum between

1995 and 2000, employment grew by only 0.9 per cent per annum, and almost all

of that growth was in the services sector (Table 1.2). Employment in agriculture

and industry combined grew by only 4.9 million or 0.2 per cent per annum over

Table 1.2 Employment in China, by sector, 19702000

Agriculture Indust ry Services Total(million persons)

1970 278.1 35.2 31.0 344.31980 291.2 77.1 55.3 423.61985 311.3 103.8 83.6 498.71989 332.3 119.8 101.3 553.41990 384.2 136.5 118.3 639.01995 354.7 156.3 168.5 679.52000 355.8 160.1 195.7 711.6Annual growth rates (per cent per annum)197080 0.5 8.2 6.0 2.1198089 1.5 5.0 7.0 3.019902000 0.8 1.6 5.2 1.1

199095 1.6 2.7 7.3 1.219952000 0.1 0.5 3.0 0.9

Note:There is a break in the published employment data for China between 1989 and 1990.Employment data for both these years are shown in the table (and also for productivity inTable 1.3), and for these two series the growth rates for the 1980s are calculated between1980 and 1989.Sources:National Bureau of Statistics 2001 and estimates of the authors.

Table 1.3 Productivity (real GDP per employee) by sector, China, 19702000

Agriculture Indust ry Services TotalAnnual growth rates (per cent per annum)

197080 1.5 0.8 0.0 2.9198089 4.0 6.0 6.1 6.719902000 4.6 11.8 3.7 8.9199095 5.8 14.3 2.5 10.719952000 3.4 9.3 5.0 7.3

Note:The growth rates for the 1980s are calculated between 1980 and 1989; see note toTable 1.2.

Sources:National Bureau of Statistics 2001 and estimates of the authors.


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the five-year period, whereas employment in services grew by 27.2 million, or 3.0

per cent per annum. In industry, growth in real GDP of 9.8 per cent per annum

generated an employment growth rate of only 0.5 per cent per annum, and all of

this growth was in 1996 between 1996 and 2000 employment in manufacturing

fell somewhat.

This analysis takes the official employment figures as well as the official GDP

figures at face value, and there are many further points that should be taken

account of in a more complete analysis. For example, the process of reform of

state-owned enterprises that began in the latter part of the 1990s meant that

these enterprises began to lay off surplus labour, contributing to the appearance

of jobless growth. This reform process still has a long way to go, however, so that

it will continue to be an important factor through the next decade. There are also

real questions about the accuracy of the industrial classification of employmentin China. For example, with many people moving from the countryside to coastal

provinces such as Guangdong or to the large cities to find employment in indus-

try or services, in some cases their registration may be still in the countryside, so

that they are counted as employed in agriculture. This factor may lead to an over-

statement of agricultural employment relative to employment in other industries.

Our analysis must be interpreted with these and other qualifications in mind.

Employment and productivity growth: The central dilemma

In spite of such qualifications, this trend towards jobless growth, especially inindustry, contributes to perhaps the central dilemma of Chinese development

strategy. Chinas labour productivity levels are low by international standards, in

spite of the rapid growth rates shown in Table 1.3. For example, the World Bank

study cited above (World Bank 2001) reported that Chinas agricultural produc-

tivity (for 199698) was only 75 per cent of that in India and less than 1 per cent

of that in USA or France. It also reported that its manufacturing productivity (for

199599) was less than 5 per cent of that in Brazil, France, Japan or the USA.

Thus there is much room for improvement in productivity levels.

On the other hand, the extent of Chinas employment problem has been well

documented (e.g. Hu 2001). There are massive surplus labour supplies in agri-

culture, still considerable excess employment in many state-owned industrial

enterprises and further growth in the labour force of some 80 million likely during

the decade to 2010. There is thus an urgent need for new job creation. But

during the 1990s nearly 90 per cent of Chinas growth was accounted for by

productivity growth, and only about 10 per cent by employment growth, on the

official figures. Policy initiat ives to accelerate productivity growth, for example by

increasing the uptake of modern technologies in agriculture and manufacturing,

will accentuate the trend to jobless growth and deepen the employment problem.

Hence the dilemma that China currently faces. Increasing productivity in

agriculture and industry has long been the driving force of development and

increasing living standards, but in current circumstances it r isks exacerbating an


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already very serious employment problem. We argue below that this dilemma is

being intensified for China by the impact of the knowledge economy.

5. Implications for employment and productivity

Structural change in development paths

As is widely known, the Industrial Revolution originated in the UK and that coun-

try was the first in modern times to build an industrial economy. This process

began in the eighteenth century, and was well advanced by 1820. By that year the

share of total employment in British agriculture had already fallen to 37.6 per

cent, and nearly one-third of all employment was in industry (Table 1.4). As the

growth in industry continued to drive the expansion of the economy through the

nineteenth and early twentieth century, the share of total employment located in

industry reached 45.2 per cent in 1929, immediately prior to the Depression, and

by that time the share of agriculture in total employment had fallen to 7.7 per

cent. These proportions remained fairly stable through to the 1950s. But after

about 1970, as the structure of the world economy began to change, industry

began to give way to services in terms of employment by 1999 industry provid-

ed only 22.6 per cent, and services 75.3 per cent, of total employment in the UK.

This broad pattern, of a strong expansion in industrial employment fed by a

transfer from agriculture but sooner or later displaced by surging employment inservices, is apparent in one way or another in the development process of all the

major advanced economies. Germany followed a similar path to Britain a little

later, with the industry share of employment reaching 41 per cent in 1913 and 43

per cent in 1950, before falling to 29 per cent by 1999. The service sector was

important much earlier in the USA, but the industry share rose from 15 per cent

in 1820 to nearly 30 per cent by 1913, and peaked at about 35 per cent in the early

Table 1.4 Share of employment in industry in total employment, selected countries,18201999

UK Germany USA Japan Korea China(per cent of total employment)

1820 32.9 n.a. 15.0 n.a. n.a. n.a.1870 42.3 28.7 24.4 n.a. n.a. n.a.1913 44.1 41.1 29.7 17.5 n.a. n.a.1929 45.2 n.a. 29.4 20.9 n.a. n.a.1950 44.9 43.0 33.6 22.6 n.a. n.a.

1970 39.5 n.a. 28.5 35.3 16.3 10.21985 26.2 37.8 23.3 34.6 34.7 21.71999 22.6 29.4 19.2 32.4 27.4 23.0

Sources:18201950: Maddison 1995, pp. 39, 253; 197093 (excluding China): OECD 2002;National Bureau of Statistics 2001.


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1950s. Japans development process began later, and in 1913, 60 per cent of

employment was in agriculture and only 17.5 per cent in industry. But the indus-

try share rose rapidly during the first three-quarters of the twentieth century,

peaking at about 37 per cent in 1973 before declining gradually to 32.4 per cent

in 1998. It is notable, in the light of Japans continuing economic problems since

the early 1990s, that the shift to services has been far slower in Japan than in any

other major economy.

It is interesting to consider the case of Korea in the prime decades of its rapid

development, between 1970 and 1990. In these two decades Korea not only grew

very rapidly (real GDP growing by 8.1% per annum) but experienced rapid struc-

tural change. In 1970, 51.5 per cent of Korean employment was in agriculture

and related primary industries (a figure comparable to that of China in 2000),

with only 16.3 per cent in industry and 32.1 per cent in services. By 1990 theemployment share in agriculture had fallen nearly two-thirds to 18.3 per cent,

with more than half of that decline being reflected in rising manufacturing jobs.

By 1990, 35 per cent of Korean jobs were in manufacturing, while the services

share had risen to 46.7 per cent (OECD 2002).

In other words, even as late as the 1980s Korea was following the traditional

development path in an accelerated fashion, with a pronounced shift of jobs from

agriculture to secondary industry, and also to services. Over a period of only two

decades, the share of jobs in manufacturing more than doubled, absorbing more

than half of the movement of jobs out of agriculture. But in the 1990s the trendreversed equally sharply, with the manufacturing share falling from 35 per cent

in 1990 to 27.4 per cent of all jobs by 1999 (OECD 2002). By that year, 61 per cent

of all Korean jobs were in the services sector.

Thus a developing country pursuing a development strategy based on industri-

alisation in the early years of the twenty-first century faces a much more difficult

task than did a similar country in 1980. Global manufacturing productivity has

doubled, and world markets have become much more open and competitive.

Reflecting higher productivity, industrial employment has fallen in absolute

terms in most developed countries since 1980 and has fallen as a share of total

employment in all these countries. With the rise of global product systems,

advanced count ries are captur ing high-value aspects of the product system, while

outsourcing lower value elements on a competitive basis to low cost countr ies. As

illustrated by Korean trends in the 1990s, these factors must inevitably impact on

the development process.

Changes in Chinas employment structure

Chinas recent experience provides a striking illustration of these trends (Table

1.5 and Figure 1.1). Between 1970 and 1996 the change in employment shares by

industry in China showed the traditional development pattern. There was a

massive movement out of agriculture, and the agricultural share fell from 80.8

per cent to 50.5 per cent. Nearly half of this labour was absorbed in industry, and


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Table 1.5 Employment shares by sector, China, 19702000

Agriculture Indust ry Services Total(per cent)

1970 80.8 10.2 9.0 1001980 68.7 18.2 13.1 1001985 62.4 20.8 16.8 1001990 60.1 21.4 18.5 1001995 52.2 23.0 24.8 100

1996 50.5 23.5 26.0 1001997 49.9 23.7 26.4 1001998 49.8 23.5 26.7 1001999 50.1 23.0 26.9 1002000 50.0 22.5 27.5 1002001 50.0 22.3 27.7 100

Source:National Bureau of Statistics 2001.

Figure 1.1 Shares of total employment by sector, China, 19912001

Source:National Bureau of Statistics 2001.

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

60

55

50

45

40

35

30

25

20

15

Per

cent

Agriculture Industry Services

the industry share of total employment increased from 10.2 per cent in 1970 to

23.5 per cent in 1996. The services share increased even more rapidly, rising from

9 per cent to 26 per cent.


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But again a str iking change in the pattern has taken place, this time after 1996.

Total industrial employment in China was lower in absolute terms in 2000 than

in 1996, in spite of a 42.5 per cent increase in real industrial GDP over this

period, and the industrial employment share fell from 23.5 per cent to 22.5 per

cent. In other words, all of the output growth in industry over this period was due

to higher productivity, rather than to increased employment. Provisional figures

for 2001 show an absolute rise in industrial employment, but a further fall in the

industrial share of total employment. With agricultural employment basically on

a plateau at close to 50 per cent of total employment, the services share rose at

the expense of the industrial share. Thus over this period China experienced

the employment pattern characteristic of developed countries in recent times a

rising service sector share fed by a declining industrial share, with agriculture

basically fixed. But this pattern was consistent with half the work force being stillengaged in agriculture.

It is too early to interpret these changes with any certainty. But, in the light of

trends in other countries driven by the factors described above, and of specific

features of the Chinese situation, it is possible that the share of industrial

employment in total employment has already passed its peak in China. The

specifically Chinese features include the very low levels of productivity in manu-

facturing, by international standards, the excess labour still engaged in many

state-owned enterprises, and the entry of China into the WTO. In this context,

further falls in the industrial share of total jobs may take place in China, in linewith trends in developed countries. But numerous other factors, such as rapid

growth in low-value manufacturing jobs as a result of Chinas entry to the WTO

and revisions to the system for the industrial classification of employment in

China, could still lead to a different outcome.

In spite of the necessary qualifications, this analysis suggests rather different

patterns of future employment in China than those commonly projected, which

typically show a continuation of the traditional development pattern. One example

is the projections to 2020 contained in a recent World Bank (2001) report. These

projections showed the agricultural share falling from 50 per cent in 2000 to

about 24 per cent by 2020, the industrial share rising from 22.5 per cent to about

28 per cent, and the services share rising from 27.5 per cent to about 48 per cent

(World Bank 2001, Figure 2.4). In the light of global trends, and of the experience

of the 19962001 period, it is likely that the share of industry in total employ-

ment will be substantially lower than anticipated in the World Bank projections

by 2020 and that, while the services share will undoubtedly increase strongly, the

fall in the agricultural share will be much more gradual than in the World Bank

figures.

Is an enhanced industrialisation strategy viable?

The traditional development path is focused on output and productivity growth

in industry and agriculture, through the introduction of advanced technologies,


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systems and processes. The growth in industrial output is the main factor driving

GDP growth, and the growth of productivity in these two sectors is the key

driver of increased living standards. Growing employment in industry, and also

in the residual services sector, absorbs labour freed by higher productivity in

agriculture as a virtuous cycle of growth is created. There is no tension between

increased productivity reduced employment per unit of output and full

employment, because of rising employment in industry and services. This out-

come is also consistent with mainstream economic theory, in which such a ten-

sion cannot exist because the theory assumes that markets adjust over time to

maintain full employment.

In the case of China, and perhaps of other developing countries, the situation

is now different. A serious conflict has arisen between increased productivity and

adequate growth in employment, and hence between GDP per head and employ-ment levels. In Chinas case, pursuing increased productivity growth in agricul-

ture and industry risks making an already serious unemployment problem much

worse.

This problem is illustrated by the scenarios for real GDP, employment and

growth shown in Table 1.6. They start from the actual 19952000 paths for the

three variables and the three sectors shown in tables 1.11.3. The first row

assumes that the sector specific growth rates for productivity and employment

from 19952000 continue over the period 200010. Given different implicit

weightings for the sectors in the latter period, the aggregate figures are a littledifferent from those for 19952000. This is the base case for the scenarios, which

are constructed by varying the productivity paths and/or the overall economic

growth rate.

The messages that this simple exercise serves to illustrate are clear enough.

First (line 2), if past rates of productivity growth are maintained in the face of

slower growth (here 7% aggregate GDP growth), there would be no employment

growth at all over the decade. Even at recent reduced productivity growth rates,

Table 1.6 GDP, employment and growth scenarios, China, 200010

Annual growth rates, 200010Real GDP Employment Productivity

Continuation of 19952000 productivity growthSustained economic growth 8.6 1.1 7.5Lower GDP growth 7.0 0.0 7.0

Productivity growth enhanced by 20%Strong economic growth 10.1 1.1 9.0

Lower GDP growth 7.0 0.8 7.9Productivity growth lower by 20%

Sustained economic growth 8.6 2.1 6.4Lower GDP growth 6.9 0.8 6.0

Source:Estimates of the authors.


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strong overall growth is needed to generate about 1 per cent growth in employ-

ment. Second, if sector productivity growth rates are increased by 20 per cent,

then (line 3) growth in real GDP of about 10 per cent per annum is needed to gen-

erate about 1 per cent growth in employment. However, if these enhanced sector

productivity growth rates are combined with only 7 per cent per annum GDP

growth, the employment outcome is disastrous (line 4), with employment falling

by 0.8 per cent per annum. Third, if sustained economic growth could be com-

bined with 20 per cent lower sector specific productivity growth rates (line 5), the

result is employment growth in excess of 2 per cent. Such a result would

contribute greatly to the resolution of Chinas employment problem. Even with

lower GDP growth (7% per annum, line 6), a reasonable employment outcome is

generated in this case.

These scenarios are arithmetic and illustrative only. They take no account ofeconomic linkages, such as the positive relationship between the rate of eco-

nomic growth and of productivity. But they do illustrate the potential risks to

China if fur ther increases in productivity growth were to be achieved, perhaps as

a result of effective policies to apply advanced technologies throughout the

economy. They also highlight the potential benefits that might accrue were it

possible to combine sustained economic growth with lower rates of productivity

growth than those in the second half of the 1990s.

6. Rethinking a development strategy

How then should we think about a development strategy for China in the know-

ledge economy? This is a fundamental question, which forces one back to the goal

of development, the welfare of the individual and of the communities in which

they are part. Here we make five observations as a preliminary response to this

question.

The service sector as a key focus, not the residual

In traditional development strategies, the focus has been on industry, and to alesser extent on agriculture, while the service sector has been the residual. As a

result, agricultural extension programs are well developed in many countries, as

are structures and processes to facilitate the growth of industry. While the service

sector has been the main generator of jobs in most developed countries for quite

a long time, little progress has been made in terms of the creation of systematic

policies for the service sector. China comes to a position in which the service

sector is a key focus of its strategy at an early stage of its development, with little

international experience to guide it. Indeed, many of the key issues remain

clouded in debate in the developed countries. These include the most effective

roles for the public and private sectors in key service areas such as education and

health, the extent to which market-based roll out of new technologies (such as


19/24


broadband) biases applications to those in which private returns can be captured

rather than to the most social beneficial applications, and the conditions under

which the service sector can generate high-quality jobs.

In recognit ion of the key role of the service sector, the Tenth Five Year Plan sets

the target for service industry growth over 200005 at 7.5 per cent per annum,

higher than that for overall economic growth. Aggregate employment growth

over the period is set at 45 million or 4 per cent per annum, bringing the service

sector share of employment up from 27.5 per cent in 2002 to 33 per cent in 2005.

To contribute towards the achievement of these formidable targets, the State

Council approved in December 2001 the Policy Suggestions for Accelerating the

Development of the Service Industr ies in the Tenth Five Year Plan prepared by

the State Development Planning Commission, and urged that they be imple-

mented throughout China. These suggestions about ways of upgrading thestructure of the service industries and firms, increasing investment and employ-

ment , reducing entry barr iers, increasing openness to foreigners and so on are

an important first step on a long road that China must travel.

Re-thinking employment, output and productivity growth

In a society in which the labour force is limited and fully employed, the task of

increasing living standards is about increasing productivity. But if a society has a

virtually unlimited labour force, much of which is less than fully employed, then

both the extent of employment and the productivity of the employed are criticalto living standards. This is all the more so when reasonably full employment is

itself an important component of community stability and well-being. For both

these reasons, China is now in a situation in which the level of employment is at

least as central to the living standards of the population as a whole as is the level

of productivity. Indeed, for any given level of GDP growth, China is likely to be

better off the higher the rate of employment growth and the lower the rate of

productivity growth.

It is difficult to think clearly about such a situation, partly because so much

economic theory and debate implicitly assumes full employment, and decrees

that increased productivity is an unambiguous good. This full employment

model, and the traditional development path involving labour transfer from

agriculture to industry, still dominates thinking about development. Sharply

increased productivity is also seen as critical to competitiveness in increasingly

open world markets. But, in response to Chinas present circumstances, it is not

sufficient to say that the goal should be to maximise output and employment

growth, not to maximise productivity growth. Indeed, Chinas experience, both

under central planning and in recent times, has shown that the pursuit of output

growth without regard to quality, value or competitiveness is unsustainable in a

globalised world. The danger is that the resulting output will be neither accepted

by domestic consumers nor saleable in international markets.


20/24


Our view is that, in Chinas present circumstances, neither output growth nor

productivity growth should be the central goal. Rather, the central objective

should be sustainable employment growth. This means growth in employment

in firms and other organisations that produce high-quality goods and services

meeting the needs of the domestic markets and/or competitive in international

markets. Given Chinas comparat ive advantage in terms of labour costs and the

global trend to increased knowledge intensity, this means a focus on knowledge-

intensive and labour-intensive products and on technologies that are either

resource saving or value enhancing, but which are not labour saving.

Product and process innovation

Another way of approaching these issues is through the distinction between prod-

uct and process innovation. Product innovations are those that involve the intro-duction of new goods and services into a given market, while process innovations

involve new ways of producing or distributing goods and services. While new

products often get most publicity, process innovations have been of enormous

importance in developed countries, and provide the main reason for the rapid and

continuing growth in industrial productivity documented above.

In an important study, Edquist, Hommen and McKelvey (2002) have argued

that product innovations are generally employment creating, while process

innovations are generally job destroying. In this analysis, process innovations

contribute to increased living standards by reducing the labour required for agiven level of output, allowing the surplus labour to be employed in other firms.

They justify this conclusion by a diverse range of empirical studies, all relating to

the developed countries.

In Chinas situation, the distinction between product and process innovations

seems to be important, on three counts. First, product innovations, including the

introduction of new products to a firms portfolio or to a given market as well as

the creation of entirely new products, appear to offer both output and employ-

ment growth. Second, process innovations of one traditional type cost reducing

through labour saving are likely on this analysis to contribute to Chinas

employment problem. But in a situation of surplus, low-cost labour, process

innovations aimed at cost reduction need not necessarily be labour saving. In this

situation, labour-intensive technologies and processes may offer a more cost-

effective solution than labour saving capital-intensive technologies. But, third,

many new process technologies are about more than cost reductions, delivering

products of higher quality and functionality than existing technologies. While

China may have abundant labour, it certainly needs technologies to enhance the

quality and functionality of its products.

There is no doubt that innovation the application of knowledge and new ideas

to production, marketing and distribution will be central to Chinas develop-

ment. And the nature of that innovation will be critical. It must relate to the


21/24


specific circumstances facing China, including the depth of Chinas employment

problem. This probably means an increased orientation to product innovation

both the introduction of products new to China and the creation within China of

globally new products and to process innovation based on the efficient use of

low cost labour to improve the quality and value of output rather than on the

minimisation of high cost labour. But the application within China of capital

intensive, labour saving process technologies is likely to be of doubtful benefit.

Higher output and incomes in agriculture

Most countries have, as they have developed, seen the agriculture sector decline

sharply as a source of both value added and employment. In China this sector,

broadly defined, still accounts for 50 per cent of employment and for about 70 per

cent of the population, and its employment share is likely to decline onlygradually in the foreseeable future. Thus agriculture will be critical to economic

development and social welfare in China for a long time to come. However, aver-

age rural incomes are only about one-third of average urban incomes, the

competitive position of much of Chinas agriculture has been declining for some

time, and it is widely held that agriculture will be one of the areas of adverse

impact from Chinas accession to the WTO (Zhong 2002). For example, the

growth of export-oriented manufacturing, and the high exchange rate that it has

made possible, has made farmers more vulnerable to competition in open markets.

New measures to generate higher output and incomes in the rural sector willneed, therefore, to be an important part of a revised development strategy. The

widespread distribution of new technologies aimed at increasing yields and other

forms of output, but not at displacing labour, will continue to be central here.

More generally, the redirection of funds from the industrial sector, and from the

new urban elites, might be necessary to reduce costs and to increase incomes in

rural areas. For example, Zhong (2002) argues that the total burden on farmers

of agricultural tax and a variety of fees and levies amounts to 710 per cent of

their net annual income, even though their incomes are far below the minimum

level for individual income tax. Most of these funds are used to finance rural edu-

cation and other fiscal expenditure at the township and village level. He argues

that substantial relief from these taxes and levies, through national and provin-

cial funding of rural education and other local expenditure, would substantially

reduce production costs and improve farmers incomes. Such an approach might

also be expected to increase the quality of education in rural areas, thereby

improving prospects for non-agricultural employment in these areas.

The welfare of the community

Our final point is that it is critical, with all the emphasis on market-based develop-

ment, to keep in mind the goal of economic development: the welfare of the

individual and of the communities in which they are part. As the experience of


22/24

Table 1.7 Selected human development indicators: China and the world

China World

Average Worst Best Low Medium Highprovince province income income income

economies economies economies

Urbanisation (%) 27.5 13.3 70.1 27 60 78Illiteracy rates (%) 13.3 40.0 6.4 49 17 < 5Mean schooling (yrs) 6.1 2.2 8.7 1.6 5.3 11.1Life expectancy (yrs) 68.8 59.1 75.2 56 68 77Infant mortality 30.6 94.6 8.7 89 39 7(per 000 live births)

Sources:Wang Shaoguang and Hu Angang 1999, based on World Bank, World DevelopmentReport 1995and other sources. China data are for 1994; other data are for 1993.


many developed countr ies demonstrates, this welfare is not to be equated to high

levels of GDP per head many factors other than aggregate economic perform-

ance affect individual and community welfare.

High levels of human development for a given level of per capita GDP have been

a feature of Chinas development path to date. Table 1.7 illustrates this point in

terms of a number of human development indicators, both for China and for all

countr ies classified into three groups by GDP per capita. It shows that, in spite of

still being a low-income country, in 1994 China had lower illiteracy and infant

mortality rates, and higher schooling and life expectancy levels, than the medium

income countries as a whole. For example, the illiteracy rate for China as a whole

was 13.3 per cent, whereas the average for the medium income countries was 17

per cent; the infant mortality rate for China was 30.6 per cent and that for the

medium income countries 39 per cent. Indeed, performance levels in the bestChinese province were comparable with those in some high-income countries.

There are some warning signs, however, in this otherwise proud record. These

lie in the fact that the differences in average outcomes between the best and worst

provinces in China are stark, equal on these measure to the difference between

low-income countries and the lesser performing high-income countries. There

are also signs of increased divergence within some provinces (Wang and Hu

1999), as there are of a more general increase in inequality within China.

Opportunities to access, create and apply knowledge are unequally distributed

across human societies, so that there seems to be a tendency to greater inequalityinherent in the global knowledge economy. An adequate development strategy for

the knowledge economy must address this fact, in particular by ensuring that the

distribution of basic human services such as education and health is as equitable

as possible. Properly used, the new information and communications tech-

nologies could assist in delivering this outcome, allowing China to continue its

proud record in this regard.


23/24


7. Conclusion

In our view, the knowledge economy is neither a feature of advanced economies,

irrelevant to China, nor the most recent enhancement of the industr ial economy.

Rather, it is a quite new stage of the evolution of the global economy, with fun-damental and pervasive implications for every nation, region and firm, and

inevitably with important social implications also.

As such, the knowledge economy poses critical questions for Chinas develop-

ment strategy, especially as the nation prepares to enter more fully into the

global trading system through accession to the WTO. Minor adaptations to the

development strategies of the industrial era, whether as employed by the now

developed countries or by the newly industrialised nations of East Asia, will not

suffice. China must shape its own distinctive development strategy for the

challenges ahead, one that takes full account of Chinas distinctive characteristicsand of the emerging realities of the knowledge economy.

Most technological development in recent centuries has taken place, and con-

tinues to take place, in the developed countries, and hence is shaped to meet the

needs of those countries. In shaping such a revised strategy, and in creating the

new technologies to meet the specific needs of a developing country, China has

some real advantages. In particular, it is in the unique position of being both a

developing country and the second largest economy in the world. Thus, if it is

successful in creating strategies and technologies to meet its own specific needs,

China may also chart a new path for other developing countries in responding to

the global knowledge economy.

Some suggestions about the nature of that revised strategy have been made

above, and many more are to be found in the chapters that follow. But defining

and then outlining the implementation of that strategy is a major undertaking,

one far beyond the scope of such a volume. Our hope is that the studies collected

in this book will make a useful contribution to this historic task.

8. References

Berger, S. and Lester, R. (1997),Made by Hong Kong, Oxford University Press, Hong Kong.Edquist, C., Hommen, L. and McKelvey, M. (2002),Innovation and Employment: Process versus

Product Innovation, Edward Elgar, London.Hatzichronoglou, T. (1996), Globalisation and competitiveness: Relevant indicators, STI

Working Paper, OECD, Paris.Hu, A. (2001), Chinas employment problems: Analysis and solutions, World Economy and

China, vol. 9, no. 1, pp. 1218.Maddison, A. (1995),Monitoring the World Economy 18201992, OECD, Paris.Maddison, A. (1998), Chinese Economic Performance in the Long Run , OECD Development

Centre, Paris.

National Bureau of Statistics (2001), China Statistical Yearbook 2001, China Statistics Press,Beijing.

Organization for Economic Co-operation and Development (OECD) (1996), Technology,Productivity and Job Creation, Paris.


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Organization for Economic Co-operation and Development (OECD) (1997), The Knowledge-based Economy, Chinese version, Paris.

Organization for Economic Co-operation and Development (OECD) (2002), STAN Database, Paris.Rawski, T. (2001), Whats happening to Chinas GDP statistics?, China Economic Review, vol.

12, no. 4, pp. 347354.

Sheehan, P. and Tegart, G. (eds) (1998), Working for the Future: Technology and Employmentin the Global Knowledge Economy , Victor ia University Press, Melbourne.

Sheehan, P., Pappas, N., Tikhomirova, G. and Sinclair, P. (1995),Australia and the KnowledgeEconomy: An Assessment of Enhanced Economic Growth Through Science and Technology,Cent re for Strategic Economic Studies, Victoria University, Melbourne.

Wang, S.and Hu A. (1999), The Political Economy of Uneven Development: The Case of China,M.E. Sharpe, New York.

World Bank (1998), World Development Report 1998/99: Knowledge for Development,Washington DC.

World Bank (2001), China and the Knowledge Economy: Seizing the 21stCentury , WashingtonDC.

Xu, Xianchun (1999), Evaluat ion of adjustments of Chinas official GDP by the World Bank andAngus Maddison,Journal of Econometric Study of Northeast Asia, vol. 1, no. 2, pp. 3754.Zhong, F. (2002), Chinas access to WTO: Its impact on Chinese agriculture and rural economy,

paper presented at the 46th Annual Conference of the AARES, Australian Agricultural andResource Economics Society, Canberra, 1215 February.

Documents

China Development Strategy