1

SYS1 AY14/15 Nanyang Technological University

HE303/HE3003: The Chinese Economy


Instructor: Kong Yam Tan
http://www.hssapps.ntu.edu.sg/faculty/econ.asp?u=KYTan
http://lkyspp.nus.edu.sg/faculty/tan-kong-yam/
Office: HSS 04-82
Email: KYTAN@ntu.edu.sg
Office Hours: by appointment

Instructor: Jipeng Zhang
http://research.ntu.edu.sg/expertise/academicprofile/pages/StaffProfile.aspx?ST_E
MAILID=JPZHANG
Office: HSS 04-68
Email: JPZhang@ntu.edu.sg
Office Hours: by appointment


Course Description

Since Deng Xiaopings reforms in 1979, China has undergone remarkable domestic
economic and social transformation. Its impact on the rest of the world has also been
momentous and far-reaching. This course is designed to enhance your understanding of
that process by looking at both economic development and transition. We examine about
twelve topics that together provide a very comprehensive coverage of the Chinese
economy.

An important emphasis of the course is to help you develop critical thinking and rigorous
analytical expertise, as well as your skills in presentation, writing, and collegial team
work. Apart from the class lectures, you will need to complete the required reading,
submit and present one group research paper.


Learning Outcome

Upon completion of the course, students will be able to:
1. Understand the historical background and path of evolution of Chinas economic
development.
2. Compare, contrast, and evaluate the strengths and weaknesses of Chinas
economic reforms.
3. Apply the economic theories and empirical methods introduced in class to the
analysis of economic phenomena related to China.


2
Required Textbook

Barry Naughton (2007), The Chinese Economy: Transition and Growth, MIT Press. (This
is a basic background text)


Supplementary Textbooks

1. Loren Brandt & Thomas G. Rawski (2008), Chinas Great Economic Transformation,
Cambridge University Press.
2. Lin, J.Y., F. Cai & Z. Li (2003), The China Miracle: Development Strategy and
Economic Reform, Revised Edition, Chinese University Press.
3. Joseph Fan & Randall Morck ed. (2012), Capitalizing China, University of Chicago
Press. Chapters are downloadable from www.nber.org.

Reading Materials

Reading the required materials before classes is necessaryfor your learning
and final exam. Advanced readings are not required, but they are very helpful for a better
understanding of the theoretical issues and will benefit you in your research and exam.


Measurement of Learning Outcomes

1. Students knowledge of Chinas economic development and reform will be assessed
by the final exam.

2. Students ability to apply economic theories and empirical methods in the study of
Chinas reforms will be measured by class presentation and research assignment.


Course Assessment

Research Paper and Presentation 30 points
Final Exam 70 points


1. Working on a group basis, students are required to write a research paper, 8-10
pages (not including, table, graph, and references; single space; letter size 11), on
a topic related to Chinese economy. All groups will present the research and key
findings in class during the last two teaching weeks.
2. The final exam will be based on lectures and required readings.



3
Academic Integrity

Academic dishonesty is a serious offense that may result in suspension or expulsion from
the university. All relevant university policies regarding academic integrity must be
followed. Copying materials from others articles, without permission, as part of your
research paper is a serious violation of academic integrity!

Note: changes, if any, to the syllabus will be announced in the class.

Course Outline

Lecture 1 (week of 11 Aug): Overview of the Chinese Economy, by Tan
Required Reading:
Barry Naughton (2007), Introduction and Chapter 1.
Shiue, Carol H. and Wolfgang Keller. 2007. Markets in China and Europe on the
Eve of the Industrial Revolution. American Economic Review, 97(4), pp. 1189-1216.
Advanced Readings:
Brandt and Rawski (2008), Chapter 1.
Yingyi Qian and Jinglian Wu (2003) China's Transition to a Market Economy: How
Far across the River? in Nicholas C. Hope, Dennis Tao Yang, and Mu Yang Li, ed.,
How Far Across the River: Chinese Policy Reform at the Millennium, Stanford
University Press, pp. 31-63.

Lecture 2 (week of 18 Aug): Economic Reform and Growth Accounting, by Zhang
Required Reading:
Barry Naughton (2007), Chapter 4.
Yingyi Qian (2000) The Process of China's Market Transition (1978-1998): The
Evolutionary, Historical, and Comparative Perspectives, Journal of Institutional and
Theoretical Economics, 156, pp. 151-171.
Young, Alwyn. 2003. Gold into Base Metals: Productivity Growth in the Peoples
Republic of China during the Reform Period. Journal of Political Economy, 111
(Dec): 1220-1261.
Young, Alwyn. 2001. The Razors Edge: Distortion and Incremental Reform in the
Peoples Republic of China. Quarterly Journal of Economics, 115 (4), 1091-1035.

Lecture 3 (week of 25 Aug): Pre-reform Period: Socialist Economic System, by
Zhang
Required Reading:
Barry Naughton (2007), Chapter 2-3.
4
Li, Wei and Dennis Tao Yang. 2005. "The Great Leap Forward: Anatomy of a
Central Planning Disaster." Journal of Political Economy, 113: 840 877.
Lin, Justin Yifu. 1990. Collectivization and Chinas Agricultural Crisis in 1959
1961. Journal of Political Economy, 98: 122852.
Advanced Readings (Watching):
China's Capitalist Revolution BBC Documentary (6.2009)

Lecture 4 (week of 1 Sep): Rural Reform and State Owned Enterprises, by Zhang
Required Reading:
Barry Naughton (2007), Chapter 10-13.
Lin, Justin (1992) Rural Reforms and Agricultural Growth in China, American
Economic Review, 82, pp. 34-51.
Jacoby, Hanan G., Guo Li, and Scott Rozelle. 2002. Hazards of Expropriation:
Tenure Insecurity and Investment in Rural China. American Economic Review, 92(5),
142047.
Monica Martinez-Bravo, Gerard Padr-i-Miquel, Nancy Qian, and Yang Yao, 2011.
Do Local Elections in Non-Democracies Increase Accountability? Evidence from Rural
China NBER Working Paper 16948.
Advanced Readings:
Brandt and Rawski (2008), Chapter 13.
Lin J., F. Cai, Z. Li 1998. Competition, Policy Burdens, and State-Owned Enterprise
Reform." American Economic Review 88, 2. 422-427.

Lecture 5 (week of 8 Sep): Development of Non-State Sector, by Zhang
Required Reading:
Barry Naughton (2007), Chapter 12-13.
Li, H. and S. Rozelle. 2004. Insider privatization with a tail: the screening contract
and performance of privatized firms in rural China. Journal of Development Economics
75 (2004): 1-26.
Hsieh. C. and P. Klenow. 2009. "Misallocation and Manufacturing TFP in China and
India." Quarterly Journal of Economics, 124(4): 1403-1448.

Lecture 6 (week of 15 Sep): Public Finance and Urbanization, by Zhang
Required Reading:
Barry Naughton (2007), Chapter 18.
Jin, Hehui, Yingyi Qian, and Barry R. Weingast. 2005.Regional Decentralization
and Fiscal Incentives: Federalism, Chinese Style. Journal of Public Economics, 89(9
10): 171942.
5
Chenggang Xu. 2011. The Fundamental Institutions of Chinas Reforms and
Development. Journal of Economic Literature, 49 (4), 1076-1151.
Au, C.C., and Vernon Henderson. 2006. Are Chinese Cities Too Small, Review of
Economic Studies, 73, 549-576
Advanced Readings:
Yingyi Qian and Barry Weingast (1996) China's Transition to Markets: Market-
Preserving Federalism, Chinese Style, Journal of Policy Reform, 1, pp. 149-185.

Lecture 7 (week of 22 Sep): Population, Labor, and Human Capital, by Tan
Required Reading:
Barry Naughton (2007), Chapter 7-8.
Junsen Zhang and Mark Rosenzweig, 2009, "Do Population Control Policies Induce
More Human Capital Investment? Twins, Birthweight, and China's 'One Child' Policy",
Review of Economic Studies, 76(3): 1149-1174.
Advanced Readings:
Brandt and Rawski (2008), Chapter 5-7.
Additional Course Material
Scott Rozelle, China's Human Capital Challenge
http://www.youtube.com/watch?v=5sIhlnNuhAg

Recess week (week of 29 Sep)

Lecture 8 (week of 6 Oct): Income Inequality and Poverty, by Tan
Required Reading:
Barry Naughton (2007), Chapter 9.
Piketty, Thomas and Nancy Qian, Income Inequality and Progressive Income
Taxation in China and India, 1986-2010, American Economic Journal Applied
Economics Vol. 1 No. 2, April 2009.
Advanced Readings:
Brandt and Rawski (2008), Chapter 18.
Wei S. and Y. Wu, Globalization and Inequality: Evidence from Within China,
NBER Working Paper 8611, November 2001.


Lecture 9 (week of 13 Oct): Foreign Trade by Tan
Required Reading:
6
Barry Naughton (2007), Chapter 16, 17
Robert Koopman, Zhi Wang, and Shang-Jin Wei. 2011. How Much of Chinese
Exports is Really Made In China? Assessing Domestic Value-Added When Processing
Trade is Pervasive. NBER Working Paper No. 14109.
Advanced Readings:
Edwin Lim, Michael Spence, and Ricardo Hausmann 2006. China and the Global
Economy: Medium-term Issues and Options: A Synthesis Report. CID Working Paper
No. 126
Yasheng Huang (2003), Selling China, Introduction.

Additional Course Material
Professor Danny Quah: The LSE Big Questions Lecture: East beats West?

Lecture 10 (week of 20 Oct): Economic Reform and Chinas Political Economy, by
Zhang
Required Reading:
Barry Naughton (2007): Chapter 15 and Chapter 20.
Li, Hongbin, and Li-An Zhou. 2005. Political Turnover and Economic Performance:
The Incentive Role of Personnel Control in China. Journal of Public Economics, 89(9
10): 174362.
Advanced Readings:
Brandt and Rawski (2008), Chapter .
Joseph Fan, Randall Morck and Bernard Yeung. 2011. Capitalizing China, NBER
Working Paper 17687.

Lecture 11 (week of 27 Oct): Foreign Direct Investment, by Tan
Required Reading:
Barry Naughton (2007), Chapter 19.
Wei, S. and G. Boyreau-Debray, Pitfalls of a State-dominated Financial System: The
Case of China, NBER Working Paper 11214, July 2005.
Advanced Readings:
Brandt and Rawski (2008), Chapter 14.
Nicholas Lardy (1998) Chinas Unfinished Economic Revolution, chap 3.


Lecture 12-13 (week of 3 and 10 Nov). Class Presentation by Students