Structural change in industrial output: China 1995-2010
| Date | 06 June 2016 |
| Published date | 06 June 2016 |
| Pages | 146-170 |
| DOI | https://doi.org/10.1108/JCEFTS-12-2015-0031 |
| Author | J.M. Albala-Bertrand |
| Subject Matter | Economics,International economics |
Structural change in industrial
output: China 1995-2010
J.M. Albala-Bertrand
School of Economics and Finance, Queen Mary University of London,
London, UK
Abstract
Purpose – The aim of this paper is to learn about some patterns of sectoral and industrial
structural change of the Chinese economy over the 1995-2010 period, which also complements a
previous paper of the author. The chosen period is about (and conveniently) bounded by two
international crises: the Southeast Asian crisis of 1997 and the world crisis that started in 2007/
2008.
Design/methodology/approach – To such a purpose, this paper set up a quantitative methodology
via input-output modelling, which allows us to decompose gross output into some key demand sources
or contributions. These are then analyzed over the full period.
Findings – It can be shown that the trajectory of the main structural patterns over the period was
not smooth and was pretty unbalanced and that they generally responded to both domestic policy
and international shocks. Export demand and heavy industry appeared to be the main engines of
the economy, which showed massive increases in their share of output, at the expense of domestic
demand, services and agriculture. Despite the high growth rates over this period, the Chinese
economy seemed to be in need of rebalancing, which seems to have started toward the end of the
authors’ period.
Originality/value – The decomposition method has been applied before by the author and others, but
the variations in this paper are original, just as original is the application to China (never been done
before), which in addition is not conned to two or so snapshots separated by many years, as is the usual
use, but to the full year-after-year change of the sectoral and industrial structure over this study’s focus
period.
Keywords China, Decomposition, Structure, Evolution, 1995-2010, Input-output,
Industrial structural change
Paper type Research paper
1. Introduction
This paper is both a continuation of our quantitative study of structural change in
China and complementary to our previous paper (Albala-Bertrand, 2013). The latter
focused on the structural change of important indicators such as capital
productivity, capital intensity, participation rate and total factor productivity for
China and its main regions, at an aggregate level. The present paper focuses on
structural change at an inter-industrial level. For the purpose, we use a quantitative
approach by means of a decomposition of the input–output model[1]. This model
mostly relies on x coefcients, so its use for forecasting beyond three to ve years
may make it insufcient in any case, let alone in a country undergoing extremely
JEL classication – L16, O4, B4 and E2
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JCEFTS
9,2
146
Journalof Chinese Economic and
ForeignTrade Studies
Vol.9 No. 2, 2016
pp.146-170
©Emerald Group Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-12-2015-0031
rapid economic and social changes. But this is not an issue for our purpose,
as we use the model to assess what happened in the recent past, rather than to forecast the
state of the economy in the future. To such an aim, we feed the model with the available
input–output statistics with a view to assess the evolution of the industrial structure of
China between 1995 and 2010, which is then signicantly more than a mere accounting
exercise. This is the period of the most momentous policy thrusts, and it is just about
bounded by two international shocks, the Southeast Asian crisis of 1997 and the world crisis
that started in 2007/2008.
There are many studies of structural changes in China at different economic
levels for similar periods. A good deal of them concentrate on exports (He and
Zhang, 2010;Amiti and Freund, 2010;Feenstra and Wei, 2010), others on
employment (Cai and Wang, 2010;Evans and Stavetieg, 2009) and others on
industrial productivity and change (Zheng et al., 2008;Yueh, 2011). A few have also
used the input–output analysis with its focus on inter-industrial relationships, such
as Ichimura and Wang (2003) engaging in interregional analysis for a given years;
Pan et al. (2012) focusing on technological spillovers for three given years; Pei et al.
(2011) concentrating on an import growth decomposition over 1997-2005; Yang et al.
(2015) dealing with vertical specialization; and there are others who focused on the
environment, energy and the like. The difference with them is that ours, rst, used
a different kind of decomposition that allows to differentiate consistently from
various sources of output demand; second, we use tables for each year of our period
(1995-2010), composed of 33 industries, and we show the structural change
trajectory of demand sources, economic sectors and main industries over this
period[1].
Our main conclusions are that the main structural trajectories and patterns over
the period were both not smooth and pretty unbalanced and that they generally
responded to both domestic policy and international shocks. Export demand and
heavy industry appear to be the main engines of the economy, which show massive
increases in their share of output, at the expense of domestic demand, services and
agriculture, which then show signicant decreases in their share of output. So
despite the high growth rates over the period, the Chinese economy seemed to be in
need of rebalancing. There is however some indication that the economy was
starting to rebalance by the end of our period.
The paper is structured as follows. We start by unravelling our methodology in
Section 2; we then present our analysis and results for China in both an aggregate
(Section 3.1) and a disaggregated fashion (Section 3.2) with the help of some useful
charts, and then we show the structural evolution over the period by means of graph
trajectories of economic sectors and their main sources of demand (Section 3.3.). We
nally present our main conclusions (Section 4.).
2. Methodology
We analyze structural change by means of an empirical decomposition of input–output
tables. This tradition started with Chenery (1960) and was later rened by several
authors (Dervis et al., 1982;Kubo et al., 1986;Sakurai, 1990). The decomposition method
used in this paper follows more closely Wyckoff and Sakurai (1992) and
Albala-Bertrand (1999,2006). This method of analyzing structural change, while
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change in
industrial
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