Competition Policy, Corporate Saving and China's Current Account Surplus

Rodney Tyers and Feng Lu

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: China's industrial reforms have left many key industries dominated by few, often state owned, firms. Until recently, these firms were not required to pay dividends to the state and the post-2000 surge in growth made them very profitable, with their economic profits adding corporate saving amounting to a fifth of GDP. This bolstered China's overall saving-investment gap and hence its controversial current account surplus. In other countries, oligopolistic industries tend to be taxed more heavily and they are commonly subjected to price regulation. This study offers an economy-wide analysis of approaches to oligopoly rents in China. The results suggest that, while policy changes targeting national saving, including increased corporate taxation, expansionary fiscal policy and SOE privatisation all help to control the external imbalance, they tend also to turn demand inward, inducing higher oligopoly rents and slower growth. Competition policy, embodying both price cap regulation and free entry, proves more effective both in controlling the external imbalance and in fostering continued growth.

JEL-codes: D43 D58 F32 L13 L43 L51 (search for similar items in EconPapers)
Pages: 37 Pages
Date: 2009-03
New Economics Papers: this item is included in nep-cna, nep-com, nep-dev and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Competition Policy, Corporate Saving and China's Current Account Surplus (2008)
Working Paper: COMPETITION POLICY, CORPORATE SAVING AND CHINA'S CURRENT ACCOUNT SURPLUS (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2009-496

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