A Study On Returns To Scale Of Selected Manufacturing Sectors In China

Since the reform and opening up, China economy has been developing at rather rapid speed, so does manufacturing industry. With the rising status of manufacturing industry in the international labor division and restructuring, its size has grown to the third place of the whole world. However, this is the situation of the whole manufacturing industry. In order to study the manufacturing industry thoroughly, it is necessary to take a deep observation on the manufacturing industry separately, so as to provide policy recommendations on each selected manufacturing sector for policy-makers. Since the returns to scale value of manufacturing sector is considered as the basic security and motivation affecting the development of the manufacturing industry, it is of theoretical and practical significance to explore the returns to scale situation of the selected manufacturing sectors in China.Firstly, this paper defined the relevant concepts, and then explained the development process of returns to scale theory. After comparing the Cobb-Douglas production function, data envelopment analysis, stochastic frontier production function analysis, which are the three methods mostly used to calculate the returns to scale value, this paper used a new and easier method which mainly used the Tornqvist index of total input and output. Based on the new model, this paper estimated the returns to scale value and technical progress situation of selected manufacturing sectors. In addition, this paper conducted a comparative study on the resultsThe results in this paper showed that the returns to scale value of each selected manufacturing sector were increasing. As for technological progress, there are three sectors-textiles, sewing industry and chemical fiber industriy-which did not reflect technological progress. According to the results, other selected sectors were at a technical progress and increasing returns to scale situation.Finally, the paper summarized the results of the study and provided policy recommendations on the challenges that China's manufacturing industry is facing, in the hope that it will develop faster and better in the future.