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Total Factor Productivity of Chinese Listed Firms and Catching Up with Korean Listed Firms

In this paper, we measured the total factor productivity (TFP) of all Chinese publicly listed firms by micro-level, that is, by industry and firm levels, from 1999 to 2005. Financial data from the China Stock Market (CSMAR) database were used and capital (K), labor (L), and material (M) were employed as input factors. China’s TFP showed some increase but remained relatively stagnant, mainly because of the low TFP of big firms, which could potentially drive the country’s overall productivity. We used four patterns of catch-up method (i.e., overtaking, convergence, slow catch-up, and reverse catch-up) developed by Jung and Lee (2010) to classify the catch-up patterns present in Chinese and Korean manufacturing industries. Two labor input methods, man hour and wage, were adopted for this purpose. The overall TFP catch-up level depended on the different labor input methods. Using man hour as labor input, no catch-up occurred in the overall industry level. Only “slow catch-up” and “reverse catch-up” manifested, indicating a huge gap between the overall industry TFPs of the two countries. Meanwhile, using wage as labor input, all of the four catch-up patterns occurred. The apparel industry particularly showed an “overtaking,” and four industries, namely, electrical machinery, textile mill products, instruments, and petroleum and coal products, showed a “convergence” pattern. The catch-up level of Chinese manufacturing firms approached that of Korean firms when wage was used as labor input.