Measuring Economic Efficiency with Business Registration and Output

CEIC China Data Talk - August 21, 2014 The average registered capital per business entity kept reaching new heights in the past few years. This fact not only indicates that a larger capital input is needed for economic development, but also reflects an increasing cost of production. With the structural transformation of China’s economy underway, economic development now focuses on high value-added industries. As a result, we see a growing need for new capital. A capital-intensive economy has become the new direction of China’s future development. This means that the greatest challenge in the upcoming future will be labour input with a higher education level and better skills. In recent years, economic output in China has been decreasing. This is in line with the downward trend of the global economy, weakening global demand. However, in China’s case, there are also other internal factors that come into play. In China, ever-rising production costs have led to a continuous drop of output efficiency. This in turn pushes down the value-added of industry. When comparing the registered capital and GDP per business entity, one can see that a large capital input can only produce a small output. Therefore, while undergoing economic reforms, China must adopt the most appropriate type of reform for itself. Purely turning to “high value-added” industries may not adequately accommodate the large labour force in China. Blindly raising capital input does not guarantee a result of high value-added economy or rapid technology advancement. Other input factors must also be properly employed. Otherwise, the result will only be a drop in productivity leading to a weakening of the economy’s overall competitiveness. By the China Database Team Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
21st August 2014 Measuring Economic Efficiency with Business Registration and Output

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