THE HISTORICAL PEAK OF THE RATE OF SURPLUS VALUE AND THE “NEW NORMAL” OF THE CHINESE ECONOMY: A POLITICAL ECONOMY ANALYSIS

This paper reports homogenous series of the rate of surplus value for the Chinese economy over the period 1956-2015 with a Marxian approach. It finds that the rate of surplus value reached the historical peak of the whole period in 2008 and that the high profitability in the decade before the 2008 crisis had relied on the continuous growth in the rate of surplus value. It provides a time series analysis to show that the rising wage pressure and value composition of capitalhas restrained profitability since 2008. Thus, this paper interprets the so-called “new normal” of the Chinese economy as a stage of declining profitability that results mainly from the stagnant rate of surplus value and the rising value composition of capital.

KEYWORDS:
rate of surplus value; profitability; new normal; chinese economy

Authorship

Hao Qi

Assistant Professor at the School of Economics, Renmin University of China.Renmin University of ChinaChinaChinaAssistant Professor at the School of Economics, Renmin University of China.

Corresponding author: Hao Qi Contact: tsihow@gmail.com

SCIMAGO INSTITUTIONS RANKINGS

Assistant Professor at the School of Economics, Renmin University of China.Renmin University of ChinaChinaChinaAssistant Professor at the School of Economics, Renmin University of China.

Figures | Tables | Formulas

Figures (4)
Tables (5)
Formulas (10)

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Figure 1
Rate of Surplus Value, 1956/2015

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Figure 2
Share of surplus value extracted by unproductive sectors, 1956/2015

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Figure 3
Value composition of capital, 1956/2015

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Figure 4
Gross vs. net rate of profit, 1956/2015

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Table 1
The Chinese Economy from a Marxian Perspective

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Table 2
Unit Root Tests

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Table 3
ARDL Bounds Test

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Table 4
ARDL Regression Results

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Table 5
Error-Correction Representation Results

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(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

Figure 1 Rate of Surplus Value, 1956/2015

Sources: Data appendix of Qi (2017QI, H. Dynamics of the rate of surplus value and the “new normal” of the Chinese economy. Research in Political Economy, v. 32, n. 1, p. 105-129, 2017.).

Figure 2 Share of surplus value extracted by unproductive sectors, 1956/2015

Source: Data appendix of Qi (2017QI, H. Dynamics of the rate of surplus value and the “new normal” of the Chinese economy. Research in Political Economy, v. 32, n. 1, p. 105-129, 2017.).

Figure 3 Value composition of capital, 1956/2015

Source: Data appendix of Qi (2017QI, H. Dynamics of the rate of surplus value and the “new normal” of the Chinese economy. Research in Political Economy, v. 32, n. 1, p. 105-129, 2017.).

Figure 4 Gross vs. net rate of profit, 1956/2015

Source: Data appendix of Qi (2017QI, H. Dynamics of the rate of surplus value and the “new normal” of the Chinese economy. Research in Political Economy, v. 32, n. 1, p. 105-129, 2017.).

Table 1 The Chinese Economy from a Marxian Perspective

The whole economy
Enterprise sector		Rest of the economy
Productive sector	Unproductive sector	Agriculture Self-employment units Non-profit institutions for scientific research, education, culture, and medical services The state non-enterprise sector
Mining, manufacturing, utilities, construction, transportation, post and telecommunications, food and hotel services, social services	Commerce Finance Real estate

Source: Author’s elaboration.

Table 2 Unit Root Tests

	Augmented Dickey-Fuller Test
	Intercept		Intercept and trend
Variables	Level	First difference	Level	First difference
NRPt	-0.987	-3.426**
WGt	-1.252	-6.682***
KVt		-4.508***	-1.183
Ut		-5.908***	-2.706
CUt	-4.098***
	Phillips-Perron Test
	Intercept		Intercept and trend
Variables	Level	First difference	Level	First difference
NRPt	-1.506	-24.123***
WGt		-39.884***	-10.351
KVt		-26.694***	-4.437
Ut		-32.713***	-14.460
CUt	-20.642***

Notes: *** and ** denote rejection of the null hypothesis of a unit root at 1% significance level and 5% significance level, respectively.
Source: Author’s elaboration based on the estimation results. For the data sources of the variables, please see the data appendix of Qi (2017QI, H. Dynamics of the rate of surplus value and the “new normal” of the Chinese economy. Research in Political Economy, v. 32, n. 1, p. 105-129, 2017.).

Table 3 ARDL Bounds Test

F-statistic	7.190***
Critical Values	I(0)	I(1)
1%	3.74	5.06
5%	2.86	4.01
10%	2.45	3.52
t-statistic	-4.148**
Critical Values	I(0)	I(1)
1%	-3.43	-4.60
5%	-2.86	-3.99
10%	-2.57	-3.66

Notes: ** and *** denotes 5% and 1% significance levels, respectively. The null hypothesis is there is no cointegration. Critical values are from the appendix of Narayan (2005NARAYAN, P. K. The saving and investment nexus for China: evidence from cointegration tests. Applied Economics, v. 37, n. 17, p. 1979-1990, 2005.).
Source: Author’s elaboration based on the estimation results. For the data sources of the variables, please see the data appendix of Qi (2017QI, H. Dynamics of the rate of surplus value and the “new normal” of the Chinese economy. Research in Political Economy, v. 32, n. 1, p. 105-129, 2017.).

Table 4 ARDL Regression Results

	Dependent variable: NRP
NRPt-1	0.752***
	(12.565)
WGt	0.256**
	(2.619)
KVt	-0.354***
	(-4.721)
Ut	-0.051
	(-0.862)
CUt	0.524***
	(3.153)
CUt-1	-0.555***
	(-3.613)
Constant	0.224
	(1.060)
Adjusted R2	0.953
Period	1984-2015
N	32

Notes: ** and *** denotes 5% and 1% level of significance, respectively. The t-statistics are in parentheses. The lag lengths of regressors are selected according to Schwarz-Bayesian information criterion. According to the ADF test and PP test, the residual of the regression is stationary. According to the Breusch-Godfrey LM test, there is no serial correlation. According to the Breusch-Pagan test, there is no heteroskedasticity.
Source: Author’s elaboration based on the estimation results. For the data sources of the variables, please see the data appendix of Qi (2017QI, H. Dynamics of the rate of surplus value and the “new normal” of the Chinese economy. Research in Political Economy, v. 32, n. 1, p. 105-129, 2017.).

Table 5 Error-Correction Representation Results

Dependent variable: ΔNRPt
Short-run effect		Long-run effect
ΔWGt	0.256**	WGt	1.031***
	(2.619)		(2.918)
ΔKVt	-0.354***	KVt	-1.426***
	(-4.721)		(-3.961)
ΔUt	-0.051	Ut	-0.205
	(-0.862)		(-0.912)
ΔCUt	0.524***	CUt	-0.126
	-3.153		(-0.159)
ECt-1	-0.248***
	(-4.148)
Constant	0.224
	(1.060)
Adjusted R2		0.617
Period		1984-2015
N		32

Notes: ** and *** denotes 5% and 1% level of significance, respectively. The t-statistics are in parentheses.The lag lengths of regressors are selected according to Schwarz-Bayesian information criterion. According to the ADF test and PP test, the residual of the regression is stationary. According to the Breusch-Godfrey LM test, there is no serial correlation. According to the Breusch-Pagan test, there is no heteroskedasticity.
Source: Author’s elaboration based on the estimation results. For the data sources of the variables, please see the data appendix of Qi (2017QI, H. Dynamics of the rate of surplus value and the “new normal” of the Chinese economy. Research in Political Economy, v. 32, n. 1, p. 105-129, 2017.).

(1)

R S V = S V / V C

(2)

V C = (1 - α) E C_{p}

(3)

S V = (N V_{p} - V C) + T O_{t} + R Y_{p} + R Y_{t}

(4)

u = U P / S V

(5)

σ = K / V C

(6)

G R P = S V / K

(7)

N R P = (S V - U P) / K

(8)

N R P_{t} = α_{0} + α_{1} W G_{t} + α_{2} K V_{t} + α_{3} U_{t} + α_{4} C U_{t} + μ_{t}

(9)

Δ N R P_{t} = β_{0} + \sum_{i = 1}^{p} β_{1} Δ N R P_{t - i} + \sum_{i = 0}^{q_{1}} β_{2} Δ W G_{t - i} + \sum_{i = 0}^{q_{2}} β_{3} Δ K V_{t - i} + \sum_{i = 0}^{q_{3}} β_{4} Δ U_{t - i} + \sum_{i = 0}^{q_{4}} β_{5} Δ C U_{t - i} + β_{6} N R P_{t - 1} + β_{7} W G_{t - 1} + β_{8} K V_{t - 1} + β_{9} U_{t - 1} + β_{10} C U_{t - 1} + v_{t}

(10)

Δ N R P_{t} = δ_{0} + \sum_{i = 1}^{p} δ_{1} Δ N R P_{t - 1} + \sum_{i = 0}^{q_{1}} δ_{2} Δ W G_{t} + \sum_{i = 0}^{q_{2}} δ_{3} Δ K V_{t} + \sum_{i = 0}^{q_{3}} δ_{4} Δ U_{t} + \sum_{i = 0}^{q_{4}} δ_{5} Δ C U_{t} + δ_{6} E C_{t - 1} + ω_{t}

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THE HISTORICAL PEAK OF THE RATE OF SURPLUS VALUE AND THE “NEW NORMAL” OF THE CHINESE ECONOMY: A POLITICAL ECONOMY ANALYSIS

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[1] Corresponding author: Hao Qi Contact: tsihow@gmail.com