Growth target management and regional economic growth

Abstract

The share of the east in national economy has decreased for the first time during the past three decades. Based on the fact that the economic growth target set by government dominates this new trend, we put forward the hypothesis that governments employ the investment growth target to manage the economic growth target. We construct a novel provincial panel data, which matches actual economic data with target data from Report on the Work of the Local Governments (2001–2013), and find that effects of the investment growth target on the economic growth target are statistically and economically significant. We also find that only after the implementation of policies for promoting regional coordinated development, which is launched by the central government in the early of 2000s and ultimately transfers resources from the east to other regions, do these effects become significant.

Keywords:

• growth target management
• regional economic growth
• convergence

JEL classifications:

• E61
• O43
• O47

Acknowledgements

We are grateful to seminar participants at Fudan University and Sun Yat-sen University for useful comments. All views expressed herein and any errors are the sole responsibility of the authors.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Xu and Liu (2014) may be an exception and prove that, in approving economy, the tool of growth target management is investment approval.

2. In order to vigorously promote the reform of administrative approval system, the State Council decided to disclose the lists of administrative approval, which were currently reserved by each department, to the society. As a result, the final number of administrative approval is determined in each department (http://spgk.scopsr.gov.cn/). Currently, a total of 26 administrative approval is determined by the National Development and Reform Commission, including three investment approval. First, the energy assessment and review of the fixed asset investment projects. Second, the approval of fixed asset investment projects for enterprises, institutions, and other social organizations, which involves 35 sub-items specifically. Third, the total size and usage direction of all types of foreign loans, the foreign loan projects and foreign investment program approval above designated size (excluding the foreign borrowing within the difference between the total investment of foreign investment project and registered capital), and the debt arrangements of foreign loan project, which involves four sub-items specifically.

3. For instance, in 2012, according to ‘Income Approach Components of Gross Regional Product’ in China Statistical Yearbook, the compensation of employees accounts for an average of 0.47 in GDP, a standard deviation of 0.06, a minimum value of 0.38 and a maximum value of 0.64. This article also tries to assess the case when α = 0.4 and α = 0.6, and the basic conclusions still exist.

4. Since the Statistical Yearbooks have not provided price indices for fixed assets investment in Tibet, we use the retail price indices instead as Zhang, Wu and Zhang (2004).

5. After the provincial People's Congress meeting, the National People's Congress meeting will be held. The central government will propose the report in national level, i.e. ‘The Report on the Work of National Government’, and ‘The Report on the Implementation of National Economic and Social Development in Year 2001, 2002, …, or 2012 and the Draft Plan In Year 2001, 2002, …, or 2012’.

6. Since we focus on the relative slowdown of the eastern economy, we use the differential variables between the eastern region and the other region. The observations can be calculated by 9×21×12, which means 9 provinces from the eastern region, 21 provinces from the other region and 12 years.

Additional information

Funding

We gratefully acknowledge financial support from the National Natural Science Foundation of China [no.71373290] and the National Social Science Fund Project [no. 13CJY031].

Notes on contributors

Xianxiang Xu

Xianxiang Xu is a professor of economics at Lingnan (University) College, Sun Yat-sen University. His research focuses on China's Economic Growth, with special emphasis on the behavior of local officials, economic growth target, and regional economic growth.

Yuanhua Gao

Yuanhua Gao is a PhD candidate of economics at Lingnan (University) College, Sun Yat-sen University. His research focuses on economic growth and political economy. Recent publication includes: The China Growth Puzzle: The Role of the Formal and the Informal Institutions (The World Economy, 2015).