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How Private Capital Boost the Urbanization Process of Chinese Cities:Private Listed Companies Examination Based on Panel Threshold Model
Author(s): WU Li-chao, TANG Lu-ping, CHEN Xi-long, Xiamen University, Nankai University, The People’s Government of Hebei Province
Pages: 33-
44
Year: 2014
Issue:
1
Journal: Economic Management
Keyword: private capital; urbanization; economic development; threshold effect;
Abstract: For developing countries,urbanization has always been a hot issue of economics.Since the reform and opening up,China’s urbanization has gotten the rapid development.The urbanization rate increased from 18%in 1978 to 51%in 2011.As a breakthrough promoting China’s economic development and structural reform in the new era,new urbanization effects various fields related to economic and social development.Urbanization contains a huge investment and consumer demand.Fully release the potential of urbanization,especially consumer demand potential,is expected to support China’s economy in the next 5-10 years.But it also should be noted that China is facing the "Lewis turning point",which means that the supply will be the new bottleneck through the process of urbanization in the future.Existing research rarely discussed the role of private capital in the process of urbanization especially lacked empirical study.This paper focuses on the influence of private capital to the urbanization.Firstly,we analyze the transmission mechanism in-depth from the supply and demand level.On the supply side,the private economy effects on urbanization by promoting economic growth,technological progress,and capital investment.On the demand side,private capital accelerates urban labor agglomeration through direct consumer demand and absorbing surplus rural population.Secondly,we test whether the development and urbanization process in China has significant positive correlation through the panel threshold regression by using Chinese 444 private listed company balanced panel data in 115 cities of 24 provinces(municipalities and autonomous regions) from 2006 to 2009,and discuss if the influence has a significant difference in different stages of urbanization in order to compare the development of private capital with China’s current urbanization level,and provide useful reference to the urbanization process of small and medium cities and the development of private economy.By regression results,we find that private capital and GDP per capita has a significant non-linear relationship because of the prominent stage characteristics of urbanization.When the urbanization rate is low,private capital only has a weak effect on GDP per capita.With the growth of urbanization rate,the level of the influence gradually increases.The private capital has a significant effect on economic development when the urbanization rate is greater than 34.4 percent.Therefore,urbanization and the development of private economy should be complementary.In order to test the robustness of the regression results,the paper also uses operating income as an indicator of private capital to alternate the total assets.The regression results are similar which can prove this study is robust and reliable.This study possesses great significance in how to encourage the development of private economy and to maximize its role of private capital in order to promoting the regional economy and improving the livelihood.We can conclude the following two points.Firstly,private capital has a very clear role in promoting economic development from the view of fixed assets investment.So,the government should further encourage private capital to participate in the fixed assets investment of the whole society.Especially,urbanization requires substantial capital investment in infrastructure,and for a long time,our country is facing a huge gap between the infrastructure investment demand and the funds availability by government.Encourage private capital to join fixed assets investment can not only alleviate the contradiction between supply and demand,but also become another driving force for economic development.Secondly,in the process of the growth of urbanization rate,private capital has more and more significant effects on the overall economic development and GDP per capita.Our government should accelerate urbanization in the areas where private economy is developed in order to more fully exert the positive role of the private economy in the increase in GDP per capita.While in the other areas,the government should take measures to encourage the development of private economy in company with the urbanization,and take fully advantage of private economy to improve people’ s livelihood.
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