Introduction of Quantitative Analysis of Institutional Framework of China and how it Impacts the Development

        Development of China appears to have taken off like the rocket, however this rapid development of China has not always been smooth. This research aims to find the role of Chinese institutions in the development of the country Today, world has become global village and organizations from one region of world have opportunity to do their businesses in other region and for this reason, China is very attractive place for those businesses but still doing business in China is not as easy as it looks.

        During the era of 90s, many of the foreign organizations were operating in China but at the same time, they were facing many challenges as the government of China has made very strict policies which international companies have to follow in China. In addition, there are so many other problems like difference of language, environment, political and economic issues of China which company had to cater. The foreign companies had set a perception about their total revenues as the economy of China was much stable and in that period and their salaries were so high like more than double but soon they got realized that it was their mistake to expect such high from the Chinese economy (Meredith, 2007).

        In 2007, per capita income of China was estimated as $2, 000 and there has been a 23 unceasing extensive gap among the regions and salaries across the state. Besides it, in the year of 2006, one hundred million citizens of state were capable to afford the things as for their luxury and beyond the necessities. On the other hand, a great number of citizens of China still have not enough money to fulfill their basic necessities even such as computers, phone, food and toothbrush etc. (Meredith, 2007).

        Even though there were many business opportunities in China but in a survey, it has been shown that only 38 % of international organizations are even successful to cover the cost which they invest on different operations this survey was conducted by World Bank in China (World Bank Report, 2008). To operate a business in China an organization has to deal with much difficulty as inadequacies because of high bureaucracy, interruption which is happen because of financial transactions and major different difference among culture, language, government and environment. China is going to be advanced day by day but the climate of China is not good for foreign companies as compare to the opportunities and stabilities of China.

        The responsibility of the institutions of economy of China is to give a mechanism to citizens of decision making to make them think that how, what and for whom will society execute the economic undertakings which are deliberated as the priority in the State. In economic development of state, the economic institutions are the central factors (Shanker, 2003).

        The central government of China has a proper control on the system of central planning of China. The local government of the state has little freedom over available resources and can make the decisions but at the same time they are only allowed to deed on the central government behalf and have to follow the instructions also.

        At this time great number of research workers has attentive and focus on the institution rather the determinants development and on the role they are playing. On the other hand, the Constantine’s Hashim and Persefoni in 2014 had researched the institution and the impact of their performance and role on the economic condition of a country. It is also said that institutions play an essential role in the success of investments and also important for a long term supportable expansion revealed by Mauro (1995) and Barro (1997).

        The currently primarily literature has express that there is a good and smooth relationship which exist among the development and the institutions but often institutions produce enormously changed results by some similar features among the different groups, societies and in the regions also (Saima, Nasir and Muhammad, 2014).

        The most significant factor of the rule of development is the law which is implemented on the government of the state to give a base to make it sure that property rights are secure and safe over there this is called “the rule of law” by Qian (1999). The regulation of laws is individual in the socialism and there is no nearly no existent of property rights practically. Though to make the market behavior more effective and efficient it is obligatory to ensure the security of property rights by generate a system of law in which problems and individual rights or responsibilities and clear guidelines must be given. To generate a market competition, the government of the state must provide ensures to the private sectors to protect their privileges (Qian, 1999).

        Pande & Udry (2005) have demonstrated that the development work for long – term is rapid in the states which have the good law of administration, smooth institutions operations, and protection of privileges of private sectors, improved and uncorrupted government bureaucrats, improved level of democracy, great quality institutions contracts and the trustworthy (Pande & Udry, 2005). Acemoglu & Robinson, (2012) state that it is important to strengthen the governmental institutions in order for the development of the Chinese economy. There are many indications that proved that the democratic institutions, the regulation of laws, stable governance, and higher GDP help to attract the great number of international organizations to embark some of its most relevant factors. The accountability and the governance of democratic are not the end point after the state has experienced the social and economic progress but relatively than to begin from the attitude of an extra supportable development (Acemoglu & Robinson, 2012).

        Heckelman et al., (2008) have created an empirical evaluation a d theoretical model of the connection among the economic, corruption and institution development. The theoretical model of the Heckelman has shown the several numbers of probable equilibrium configurations in the linked among the growth, corruption and the quality of institution. If the position of institution is stable and good than the corruption has the destructive impact on the on the growth in a government with the great quality of institutional stated by them. The research has laid stress on the extent on quality of institution and its influence on the growth of economy. The outcome of the research has concluded that the economic stability and institutional quality have huge importance to bring more business in China (Zhuang et al., 2010).

        According to the writers, Kaufmann and Kraay (2002) have calculated index based aggregate indicators of governance in which they have addressed multiple dimensions of governance. The six aggregate indicators that are used by the writers are as follow:

        Voice and Accountability: In this dimension, the involvement and participation of the citizen is addressed in the selection of a government for their country.

Political Stability: In this dimension, it is addressed that what are possibilities exists to overthrow a government from power.

Government effectiveness: In this accept it is addressed that how effectively a government is managing its roles by measuring the quality of public services and bureaucracy.

Regulatory Quality: In this dimension the government’s policies friendliness is addressed.

Rule of Law: this dimension measure that effectively the law system is protecting the rights of the people living in the country

Corruption Control: this dimension measure the effectiveness of the accountability system within the country.

References of  Quantitative Analysis of Institutional Framework of China and how it Impacts the Development

Acemoglu, D., & Robinson, J.A. (2012) Why Nations Fail: The Origins of Power, Prosperity and Poverty, London: Profile Books.

Aron, J. (2000). Growth and institutions: A review of the evidence. The World Bank Research Observer

Barro R.J. (1997). Determinants of Economic Growth: A Cross-Country Empirical Study. MIT Press.

Constantinos A., Persefoni T. and Hashim R.O. (2014). Institutional Quality and Economic Growth: Empirical Evidence from the Sudanese Economy. Economic Annals, 59(203)

Heckelman, C., & Powell, B. (2010). Corruption and the institutional environment for growth. Comparative Economic Studies, 52(3), 351-378

Kaufman, Daniel and Aart Kraay. 2002. Governance Indicators, Aid Allocation, and the Millenium Challenge Account. Unpublished draft for Discussion, World Bank, Washington, D.C.

Mankiw, N.G., Romer, D., & Weil, D.N. (1992). A contribution to the empirics of economic growth, Quarterly Journal of Economics, 107(2), 408-437

Mauro P. (1995). Corruption and Growth. The Quarterly Journal of Economics, 110(3), 681-712.

Meredith, R. (2007). The elephant and the dragon: The rise of India and China and what it means for all of us. New York: NY, W.W. Norton & Co.

Pande, R., & Udry, C. (2005). Institutions and development: A view from below. Yale University Economic Growth Center, Discussion Paper, No.928

Qian, Yingyi (1999). The institutional foundations of China’s market transition, Paper Prepared for World Bank’s Annual Conference on Development Economics, Washington, D.C.

Saima N., Nasir I. and Mohammed A.K. (2014). The impact of Institutional Quality on Economic Growth: Panel Evidence. The Pakistan Development Review, 53(1), 15-31

Shanker, D. (2003). Developing countries, China and economic institutions, Social Science Research Network, from http://papers.ssrn.com/so13/papers.cfm/abstract_id=277928

World Bank Report (2008). GDP and economic indicators of China, from http://www.worldbank.org

Zhuang, J., De Dios, E., & Martin, A.L. (2010). Governance and institutional quality and the links with economic growth and income inequality: With special reference to Developing Asia. Asian Development Bank Economics, Working Paper S