1. Productivity in Chinese Industry: 1998-2013 (Very) Preliminary Findings
Loren Brandt, University of Toronto
Luhang Wang, Xiamen University
Yifan Zhang, Chinese University of Hong Kong
World Bank Beijing Office
February 24, 2017
Not for citation without permission

2. Summary
Extend existing NBS above-scale database to include 2008,
Link firms overtime by name and IDs
Construct estimates of VA and real capital stocks
Update input and output deflators
Alternative definitions of “State-owned” (type versus paid in capital)
Construct productivity estimates for later years
Use production function estimates for translog for to estimate revenue TFP at firm level
Aggregate firm level estimates to obtain sector and industry-wide TFP measures
Data/Empirical Issues
Size threshold increases from 5 to 20 million RMB
Possible change in reporting of firm employment in 2013
Revenue TFP may confound changes in TFP and markups (price/MC)
Changes in underlying production technology

3. Construction of Value Added
Firms
Value Added
Growth in VA
Year
Number
Reported
Calculated
Imputed
1998
165,039
1.94
2.33
1999
161,972
2.16
2.52
11% 9%
2000
162,820
2.54
2.96
18%
17%
2001
168,985
2.79
3.15
10% 7%
2002
181,500
3.30
3.64
15%
2003
196,168
4.20
4.47
27%
23%
2004
279,068
5.70
5.65
5.77
36%
35%
29%
2005
271,788
7.22
7.20
7.07
22%
2006
301,906
9.11
9.10
8.78
26%
24%
2007
336,698
11.70
11.67
11.46
28%
30%
2008
411,403
13.24
16%
2011
300,685
19.36
2012
309,460
23.39
21%
2013
342,953
27.11
Note:
When imputing Value Added:
1. Wage = Wage bill * sector multiplier
2. Input=output*salescost/salesrevenue - wage - depreciation

4. Big Picture

5. Differences Across Sectors: 1998-2005

6. Broad Decline in TFP Growth Across Sectors

8. Contributing Margins to TFP Growth
Improvement among incumbent firms (Within)
Reallocation towards better firms (Between)
Entry of higher productivity firms (Entry)
Exit of lower productivity firms (Exit)

10. Productivity Growth Decomposition

11. Size of the State Sector
Def 1: Ownership Type
Def 2: Paid in Capital
Def 3: Either
Year
# of firms
GVIO VA %
1998
38.0
44.8
37.4
38.9
42.8
49.9
58.9
1999
35.6
42.9
34.6
40.1
48.0
57.6
2000
30.8
41.2
29.2
34.2
35.1
46.1
56.0
2001
24.7
36.9
23.7
30.1
29.0
42.4
52.7
2002
20.8
34.5
19.6
27.0
24.8
39.7
50.4
2003
16.2
31.1
14.9
24.3
19.5
36.1
47.6
2004
12.5
28.0
11.0
20.9
14.5
32.0
41.4
2005
9.5
27.4
8.2
11.8
31.3
39.3
2006
7.8
25.7
6.8
18.1
9.9
29.6
37.0
2007
5.8
4.1
15.9
7.2
27.5
34.1
2008
4.8
22.9
3.5
15.1
6.2
26.3
30.6
2011
5.2
21.6
2.9
11.6
6.5
24.6
2012
5.0
20.6
3.6
13.0
7.0
24.4
30.4
2013
4.6
4.5
14.4
7.6
23.3
29.4

12. State vs Non-State (By Paid-in Capital)

13. State vs Non-State (By Either Definition)

16. Role of 20 million Size Threshold
Firms
Share of Total
Year
Number
Output
Employment
Capital Stock
1998
97,729
66.9
12.8
30.3
15.9
1999
93,548
65.2
11.5
28.6
15.6
2000
90,548
62.7
9.9
26.3
13.9
2001
92,763
61.4
9.5
26.1
13.0
2002
95,923
59.1
8.6
24.3
12.3
2003
99,794
55.1
7.3
22.1
10.7
2004
147,728
58.0
8.2
23.9
11.3
2005
125,553
50.0
5.9
18.9
8.7
2006
128,608
46.1
4.9
16.7
7.8
2007
128,888
41.3
3.9
14.2
6.2
2008
165,550
43.4
4.1
14.7
6.6
2011
3,314
1.2
0.1
0.5
0.2
2012
3,417
0.6
2013
3,161
1.0
0.0
0.7
0.3

17. Very Tentative Findings
Significant decline in TFP after mid-2000s
Spans most sectors at two-digit
…tfp growth appears to be negligible
Consistent with more aggregate exercises (Dollar, 2017)
Premium of non-state firms over state at the 2 digit level disappears and becomes negative on average ….. Less dynamic private sector?
Contribution of entry diminished, and not offset by improvement on other margins
Big Question (1): Was the high productivity growth between a product of one- time gains?
WTO entry
Reduction in barriers to entry
Retreat of SOEs in non-strategic sectors
Increased labor mobility
Big question (2): What is underlying the sharp reduction in productivity growth after 2007?
Huge Caveat: Important measurement issues and challenges