Profitability of China's industrial firms (1978–2006)

Feng, Lixin; Guoqing, Song; Tang, Jie; Zhao, Hongyan; Liu, Liu

doi:10.1080/17538960701564833

Cited by 26 publications

(19 citation statements)

References 2 publications

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“…Lu et al (2008) presented a matrix of nine indicators of proªtability given different measures of the capital return and capital stock.2 McDonald (1999) used the ratio of proªts to sales as a proxy for the price-cost margin in analyzing the determinants of ªrm proªtability in Australian manufacturing.…”

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confidence: 99%

Foreign Entry and Profitability of Domestic Firms: Evidence from China

2013

Asian Economic Papers

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Profitability provides a yardstick for judging the operational efficiency, growth, and survival of a business enterprise. This study investigates the determinants of firm profitability in the Chinese manufacturing sector, with a focus on the impact of foreign entry on the profitability of domestic firms. Our findings show an inverted-U relationship between foreign entry and the profitability of domestic firms. Furthermore, we also find that the effect of foreign entry on domestic firm profitability varies according to the ownership structure of domestic firms and the export intensity of foreign newcomers. the 1 percent level. All the independent variables are lagged one year to mitigate simultaneity issues. Region, sector (two-digit industry), and time dummies are not reported, though they are included in all regressions, and are jointly signiªcant in each regression. Regressions were implemented using -xtreg-commands in Stata 11.0.

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Foreign Entry and Profitability of Domestic Firms: Evidence from China

2013

Asian Economic Papers

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“…There is evidence that the profitability of the state sector improved after 1998: the measures taken from the mid-1990s onwards to make SOEs more accountable for their profits and losses seem to have been effective (Lu et al, 2008;Knight and Ding, 2010). The…”

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Negative Investment in China: Financing Constraints and Restructuring Versus Growth

2012

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Further information on publisher's website:http://www.dur.ac.uk/business/faculty/working-papers/ Publisher's copyright statement:Additional information: Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. AbstractThis paper attempts to address a puzzle in China's investment pattern: despite high aggregate investment and remarkable economic growth, negative net investment is commonly found at the microeconomic level. Using a large firm-level dataset, we test three hypotheses to explain the existence and extent of negative investment in each ownership group: what we term the efficiency (or restructuring) hypothesis, the (lack of) financing hypothesis, and the (slow) growth hypothesis. Our panel data probit estimations shows that negative investment by state-owned firms can be explained mainly by inefficiency: owing to over-investment or mis-investment in the past, these firms have had to restructure and to get rid of obsolete capital in the face of increasing competition and hardening budgets. The financing explanation holds for private firms, which have had to divest in order to raise capital. However, rapid economic growth weighs against both effects in all types of firms, with a larger impact for firms in the private and foreign sectors. A tobit model, estimated to examine the determinants of the amount of negative investment, yields similar conclusions.

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“…The underlying reasons for China’s high investment must in turn be examined (Knight and Ding, 2010). Research on profits in China shows that the rate of profit on capital has remained high despite the remarkable increase in the capital–labour ratio (Bai et al, 2006; Lu et al, 2008; Knight and Ding, 2010). Using corporate accounting data, Lu et al (2008) examined various indicators of profitability.…”

Section: China’s Macroeconomic Imbalancesmentioning

confidence: 99%

China’s Macroeconomic Imbalances: Causes and Consequences

Knight¹,

Wang²

2011

World Economy

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In recent years, China has experienced two forms of extreme macroeconomic imbalance: an expenditure imbalance in the sense of very high investment and very low consumption, giving rise to rapid capital accumulation; and an imbalance between expenditure and production, producing external imbalance, i.e. a huge surplus on the current account of the balance of payments. Both imbalances imply a low rate of time discount by both government and society: consumption in the present is forgone in favour of consumption in the future. The paper examines how these imbalances came about and goes on to consider whether they can be sustained and how they might be redressed. There is no evidence that the rapid capital accumulation has reduced the rate of profit on capital and thus the incentive to invest. However, persistent external imbalance poses a threat to investment if it generates excess liquidity and asset bubbles. The current account surplus rose remarkably in the years 2004–07. This was associated with exogenous increases in competiveness and in saving, both attributable to the economic reform policies. On current policies, the surplus is likely to rise again once the world economy recovers from its recession. This poses three sorts of problems, each of which is examined in turn: difficulties for macroeconomic stabilisation policies; risk of capital loss on the foreign exchange holdings; and the threat of retaliation by China’s trading partners. A combination of internal and external policies will be required to redress the imbalance.

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Profitability of China's industrial firms (1978–2006)

Cited by 26 publications

References 2 publications

Foreign Entry and Profitability of Domestic Firms: Evidence from China

Foreign Entry and Profitability of Domestic Firms: Evidence from China

Negative Investment in China: Financing Constraints and Restructuring Versus Growth

China’s Macroeconomic Imbalances: Causes and Consequences

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