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39 Cards in this Set

  • Front
  • Back
Pros and cons of decentralization
Pros: local incentives, exploit local information, meet local needs, and experimentation
cons: inequity (lack of fairness) , nonuniform standards, breeds localism, makes coordination difficult
Pre reform fiscal system
1. revenues from enterprises owned by different governments levels.
2. playing to provinces in elite political competition
3. no division of authority and responsibility b/w center and regions.
Pre 1994 fiscal reforms
> significant decentralization ( revenues and expenditure in local hands.
>Negotiated arrangements with different provinces
>>highly incentivized local leader
>>Market preserving federalism
Problems with decentralization
>over investment due to revenue max
>Local protectionism
> Inability to redistribute
1994 tax reforms
> central tax collection
>more revenue for central gov.
Focus on vlaue added tax
Challenges with new tax reforms
Some provinces receive more tax rebates. Local gov. debt
History of FDI
Normal relations with US in 1979, More special economic zones, Lower tariffs
Key elements of Joint Venture law
> income tax rate 15%
>No income tax first two years
>50 % tax years 3 to 5
> Import inputs no tax
> no export duties
Key Feature of China's special economic zones
> strong infrastructure
> preferential policies
Fous on exports
Limited early success of FDI
>Not export orientated
>Difficult attracting high tech
> legal environment
Reason for success after 1992 in FDI
>Dengs souther tour spring of 1992
>Expand access of foreign capital
>Openness greater then other Asian countries
Distinctive feature of FDI in China
> High FDI in manufacturing much less services
>FDI inflows predominately form East asia, HK
Why FDI in china benefits?
and cones
> low wages
>immense domestic market
> Disciplined labor force

> bad legal system
> political and other risk
Huang's argument
Main reason for FDI reflects bad in china. no good financing system.
Benefits and cost of FDI in China
>management skills
>profit remitted abroad
>Discomfort about foreign ownership
Huang's evidence
>fragmentation: Guangdong receives 1/3 of FDI
The role of FDI in China's economic development
> FDI as eky part of globalization of China
>FDI key in China's growth
>FDI widening regional gaps, and educational gaps .
Accusations that Chinese is manipulating the exchange rate
> deficit with US
> Geihner senate testimony
>RMB highly undervalued and inconsistent with China's global responsibilities
China's view on currency
> not manipulating currency
> Support stability in currency for trade
>China not protectionist , seen in its overall trade balance.
> Trade shifting from other asian nations to China to US
>China has employment problems as well
Past History of US-China trade relations
> Jacson Vnik Amendment to trade act. 1974- trade with non-market economies
>China gains MFN status in 1980
Theoretical problems with manipulation argument
> trade imbalance reflects differences in savings and investment in the two countries
>Manipulation of real exchange rate is hard if prices are flexible
Methods to measure currency balance
> Divination from trend, over values it not under
>Balassa- Samuelson, per capita due to non tradables
Why uan revaluation will not save US jobs
> trade with china is small part of US economy
>Chinas will replace its imports
Why revaluation of yuan could hurt US
> purchase less from US
>China import demand could pust prices up, inflation world wide
registration system. urban/rural
migration and urbanization background
> Hukou system
>Rapid non agricultural growth
> Unbalanced growth- costal and non costal.
Key transitions 1978 to 2010 labor market
> Agriculture share 71% to 37%
>Urban area, 24% to 46%
> State to private, 78% to 21%
Importance of labor
Labor key factor of production
Labor is individuals welfare
Challenges in reforms in labor market
> emplyment creation and adjustment
> Rising inequality
> Information of the labor market and establishing effective social insurance programs.
Chinas labor contract law 2008
>Labor contracts, after 2 fixed term, 10year contract must be open
>30 day notice to employee
Results of labor law
> education correlates with contracts
> State owned well enforced, follow by foreign and then general private.
> Women less likely to have contract
> local residents dissatisfied with law while migrant are satisfied.
Population, one child policy History and consequences
<Policy in 1980
<Relaxed for 1.5 child policy in 1984
>son preference,
> large number of singel men
Challenge of rapid aging
>great challenges for health care system to meet growing demand for the elderly
Bardhan's view on Democracy in china
>Avoids disastrous mistakes ( famine )
>Better at managing conflict
>more pressure to share benefits fo growth
>competitive populism
>social order if week civic culture
Bardhams viw on authoritarianism
not necessary ( india, costa rica) nor sufficient (africa) >
China reasons in succes in tis government policy
> Recruiting talent
>Review by party, pressure to do well compre to other towns
> strong decentralization
Lipset hypothesis
Prosperity stimulates democracy
Chinas distinctive feature of economic growth
Highe investment and larger manufacturing share
> structural changes
China and R &D
Hight investemnt
> foreign investment might hinder the ability to make technology themselves.s