Ownership, Foreign Investment and Productivity–A Case Study of the Automotive Industry in China

Deqiang Liu, Yanyun Zhao
Public Access Documents

It is widely believed that the enter of multinational automakers and the ownership reforms of native enterprises promoted the development of Chinas automotive industry in recent years, but no study has been conducted on its productivity. In this study, using micro-data on Chinas automakers from 1999 to 2004, we tried to elucidate the characteristics of the development of Chinas auto industry. According to the analysis results based on Cob-Douglas type production function, we found, 1) the rapid development of auto industries in China accompanies a rapid improvement in productivity from 1999-2004; 2) in Chinas auto industry, foreign-affiliated firms or foreign capital have overwhelming strength with regard to productivity; 3) the improvement in productivity of auto industry is not attributable to foreign-affiliated firms or foreign capital only, the contribution of state capital to productivity has risen gradually, and has approached that of non-state capital.