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Additional info for China’s Economic Development
6 Note: Revenue from both domestic and foreign debts is excluded. Source: SSB (1997, p. 238). 3 Perotti-Sun-Zou New Losses from New Investment Projects Many newly established projects in the SOE sector often become new sources of loss. These projects are typically established by local governments or industrial ministries and bureaus. The failures of these projects are the failure of China’s state investment system, which has been characterized by bureaucratic co-ordination and has not yet been reformed successfully (Sun, 1997a, 1998).
3 Before 3 The GDP share of SOEs in 1995 is estimated as follows. In 1995, the agricultural sector (dominated by peasant households) produced 21 percent of GDP (SSB, 1997, p. 42), the broader TVE sector contributed 30 percent of GDP (Ministry of Agriculture, 1997), and the urban collective, private, and foreign sectors could have produced 5 percent of GDP. Enterprises in China 37 the 1994 tax reform, the nominal tax rate of corporate income for large and medium-sized SOEs was 55 percent, 35 percent for private enterprises, 33 percent for foreign-invested enterprises, and progressive tax rates ranging from 7 percent to 50 percent levied on small SOEs and collective enterprises, including TVEs.
This result is taken as empirical support for the hypothesis that consumption irrationality led to famine. However, since only 24 sample points are used in the regression and the specification does not control for other possible causes of famine, the correlation can hardly represent reliable evidence on causality. The political attitude of provincial leaders may have strongly influenced local policies and economic activities during the GLF, which could in turn have contributed to the excess mortality (Hypothesis 3).