China's Circulation Industry Growth Efficiency Research

In modern economy, the circulation industry with its guiding production, promoting consumption and industrial linkage, is becoming leading and fundamental industry of economy. Since the1990s, with the proceeding of the reform and opening up and market economy, series of policies and measures are made to develop the industry in China. After a long period of sustained development, fundamental changes in China’s commodity market have been taken place, and the circulation industry plays an increasingly important role in the economy and social development. But there are still many problems in the industry, such as low development level, weak innovation capability, high logistics costs, and serious business losses, etc. Efficiency is the sustained growth impetus of industry. Only through productivity increasing, can the industrial competitive and sustainability be enhanced. Therefore, this paper employs modern economic theories and analysis tools and methods to theoretically and empirically study on the growth efficiency of China’s circulation industry, and then puts forward some policy suggestions to promote the growth and efficiency of the industry.The paper firstly introduces the theory of economic growth, service economy and circulation economy, and the Stochastic Frontier Approach (SFA) and Data Envelopment Analysis (DEA), so as to provide a general theoretical foundation and methodological tools for the research. Then, the growth status of China’s circulation industry during1993-2008is analyzed from two aspects of total amount and structure. From the perspective of total amount, the circulation industry has maintained a relatively high growth rate, but slightly lower than the tertiary industry. The industry accounted for the proportion of GDP and tertiary industry remains stable and absorbs employment in an increasingly important role. From the perspective of structure, the optimization of sector structure is relative slow. As for regional structure, the regional imbalances are becoming more and more obvious. For the ownership, the circulation industry is stilled dominated by state-owned economy, the ownership structure of the industry remains to be further optimized. Then, the paper empirically studies on the growth efficiency of China’s circulation industry.First of all, the paper uses stochastic frontier approach of translog production function to empirically analyze the technical efficiency changes of China’s circulation industry, and discusses its influencing factors. The result shows that, first, the technical efficiency of China’s circulation industry is low, and it is still far from being using the available resources and technologies, therefore, there is more to enhance the technical efficiency. Second, the regional imbalance of technical efficiency is serious, the eastern is significantly higher than the middle and the west, and provincial difference is also obvious. Whether among the three regions, or between the provinces, regional difference is very obvious. Third, human capital, marketization and opening to the outside are the main influencing factors of technical efficiency. Human capital effectively reflects the utilization of factors, the process of marketization means more effective resource allocation and incentive mechanisms, foreign trade promotes technology transfer and foreign investment brings advanced technology and management experience, all of these have positive impacts on technical efficiency.And then, the paper applies DEA-based Malmquist index to estimate the total factor productivity growth of China’s circulation industry, and decompose it into technical efficiency and technical progress, then tests the convergence of the TFP growth. The result shows that, first, the TFP growth of China’s circulation industry is slow. Both the technical efficiency and technical progress grows too slowly, resulting in a slower growth rate of the industry. Therefore, there is still a large space for TFP growth of the industry. In technical efficiency, pure technical efficiency index tends to rise, while scale efficiency index tends to decline. Second, there are significant regional disparities in TFP growth. The East has the highest growth rate, followed by the middle, while the west is negative growth. In addition, provincial difference in TFP is also obvious. In short, TFP growth varies not only among the three areas but also between the provinces. Third, there exists σ convergence and β convergence in China’s circulation industry. Whether in the whole country or the three areas internal, the convergence trend of TFP growth is shown.Finally, the paper compares the productivity of manufacturing and circulation industry based on DEA-Malmquist productivity index, applies econometric methods to empirically test the spillover effects of circulation industry, and discusses its policy implications for government. The research shows that, the growth efficiency of China’s circulation industry is significantly worse than manufacturing. The advantages in technical innovation and technical progress are the main reasons for high TFP growth of manufacturing. As for the circulation industry, the technical progress is slow and technical efficiency is not high, resulting in poor growth efficiency. However, there are strong spillover effects of circulation industry to the other sectors of economy. By the utilization of the effects, circulation sector not only contributes to the growth of non-circulation sector, but also promotes the economic growth. Therefore, great importance should be attached to the position and role of circulation industry in economy when making and implicating industrial policies. The paper shows that, although China’s circulation industry has technical efficiency and technical progress driven characteristics, but the growth of both are slow, so resulting in a low growth rate of total factor productivity. The growth of TFP lies in not only the improvement of industrial technology, but also significant improvement of technology. Therefore, the circulation industry should not only make innovations in the systems and mechanisms to promote higher technical efficiency; but also strengthen technical innovation and technical progress to achieve continuous upgrading of circulation technology. To achieve this, the paper puts forward some policy suggestions:first, deepen the reform of circulation systems to eliminate efficiency losses caused by institutional barriers; second, strengthen technology innovation to improve frontier technology progress; third, strengthen human resource investment to improve the quality of circulation employees; forth, expand opening up to promote technology transfer and efficiency improvement; fifth, implicate regional circulation policies to promote coordinated development of regional circulation.