Economic and Political Studies
Vol. 5 No. 2, 2017
Economic reform as a precursor to political reform for development - does China have a model for resource-rich African Muslim countries?
Ataul Huq Pramanik
Having gone through colonial exploitation for centuries, most of the colonies after independence from the West were confronted with two models. Contrary to the free market capitalist system based on power-sharing, some of the newly independent countries opted for an authoritarian model and ended up with unjust/distorted development based on exclusivist institutions. Despite having rich-resource endowments with less pressure of population, these countries essentially failed to promote inclusive economic institutions to ensure private property and an unbiased system of law which, in turn, would unleash the immense potentials based on incentives, talent and skills highly required for enhancing productivity and prosperity. The authoritarian but good governance (GG) under state-led development of East Asian miracle economies, in general, and China, in particular, pursuing the goal of economic modernisation before political reform made spectacular achievements in less than quarter of a century. But some of the resource-rich African countries, being unable to remain immune from the vested interest/political lobby groups, failed to make economic reform being promoted by agriculture-led development to facilitate political reform subsequently. Based on the main research question of this paper, it will be argued that the massive economic reform as that of China in terms of agriculture-led development can gradually set the stage for subsequent political reform. Based on the historical evidence of successful authoritarian development model, this paper argues in favour of Chinese style of gradualist development using incentives through empowering the households as well as individuals in materialising their potentials. However, only the effective inclusive institutions as experienced by way of ensuring all sorts of public and private goods can help the resource-rich African Muslim countries to pursue economic prosperity with fair distribution of economic, political and socio-cultural power resources. This, in turn, can help restore a ‘feeling of togetherness’ or what one of the greatest scholars of Islam – Ibn Khaldun – terms as ‘Asabiya’ for achieving a comprehensive, inclusive and sustainable development made possible by GG as opposed to liberal democracy.
WTO, credible commitments, and China’s reform of state-owned enterprises
Ye Tian & Min Xia
This study focusses on the relationship between China’s accession to the World Trade Organisation (WTO) and its reform of state-owned enterprises (SOEs) and suggests that the major incentive for the Chinese government to join the WTO is to promote economic reforms through overcoming domestic obstacles. After other options such as decentralisation, legalisation, and privatization failed to enhance viability of SOEs, the Chinese government began to rely on international institutions to enhance its credibility and harden the budget constraints on SOEs. The WTO is one of the most important international organisations and has binding force for its member states. China’s participation in the WTO will effectively harden budget constraints on its SOEs and improve the efficiency of these enterprises through introducing competition into the domestic market. Historical data support our argument and indicate that China has effectively enhanced the credibility of government commitments and promoted the reform of its SOEs since its accession to the WTO.
Entrepreneurial activities and institutional environment in China
Bei Luo & Terence Tai-Leung Chong
This article aims to examine the relationship between the quality of an institutional environment and the characteristics of entrepreneurial activities within the context of China. An event study was conducted to investigate the impacts of the announcement of the Forbes China Rich List on prices of the shares associated with entrepreneurs on the list. This article concludes that the quality of an institutional environment is greatly negatively related to unproductive entrepreneurial activities.
Central government agencies in China: toward a research agenda
Central government agencies play key roles in making and implementing public policies in China, but the empirical studies on these organisations are disproportionally scarce. Scholars in political science and public administration predominantly focus their researches on local governments at various levels, while paying little, if any, attention to the central counterparts. This article discusses the phenomenon of strong local but weak central government research pattern (the so called ‘central–local research divide’), and identifies the driving forces behind this research gap. It also introduces the lessons and implications from the US and European research projects for developing, replicating, and extending central agency databases. The research further elaborates the existing variables and data sources on central agencies and develops the China Central Agency Database (CCAD) to advance the quantitative research of central agencies in China. Finally, a conclusion is drawn with a research agenda to encourage researchers to coproduce the CCAD and embrace the study of central agencies.
Dynamics of occupational mobility: an empirical analysis based on headhunting data
Shilan Feng, Ya Tan & Liutang Gong
This paper analyses occupational mobility in the labour market using survey data from a headhunting company. Four aspects of occupational mobility are discussed: the frequency of occupational mobility, cross-industry mobility, cross-ownership mobility and the influence of the macro economy on occupational mobility. The following are our findings: (1) educational level may insignificantly or negatively influence occupational mobility; (2) the younger generation is more active in the labour market; (3) although the public sector provides stable job opportunities, labour mobility in the first five years is not lower in the public sector than in the private sector; and (4) Party members are more frequently occupationally mobile.
Decline of oil prices and the negative interest rate policy in Japan
Naoyuki Yoshino, Farhad Taghizadeh-Hesary & Nour Tawk
In April 2013, the Bank of Japan (BOJ) introduced an inflation target of 2% with the aim of overcoming deflation and achieving sustainable economic growth. But due to lower international oil prices it was unable to achieve this target and was forced to take further measures. Hence, in February 2016, the BOJ adopted a negative interest rate policy by massively increasing the money supply through the purchase of long-term Japanese government bonds (JGB). The BOJ had previously only purchased short-term government bonds, a policy that flattened the yield curve of JGBs. On the one hand, banks reduced the number of government bonds they purchased because short-term bond yields had become negative. The interest rates of long-term government bond up to 15 years even became negative. On the other hand, bank loans to corporates did not increase, due to Japanese economy’s vertical investment–saving (IS) curve. The purpose of this paper is to show that the monetary policy through implementation of the zero interest rate and more recently through the negative interest rate could not help the Japanese economy to recover from the long-lasting recession and these are not the remedy. It is of key importance to make the IS curve downward rather than vertical. That means the rate of return on investment must be positive and companies must be willing to invest even if interest rates are set too low. Japan’s long-term recession is due to structural problems that cannot be solved by its current monetary policy. The paper also explains why the BOJ has to reduce its 2% inflation target in the present low oil price era.
Renmin University of China
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