China Economic Review xxx (xxxx) xxx–xxx

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China Economic Review

journal homepage: www.elsevier.com/locate/chieco

Intangible capital in Chinese regional economies: Measurement

and analysis
Qing Li, Yanrui Wu⁎
Economics Discipline, Business School, University of Western Australia, Perth 6009, Australia

AR TI CLE I NF O AB S T R A CT

JEL classification: Intangible capital is treated as an important determinant of economic growth in the age of
O340 knowledge economy. It has however attracted less attention in China largely due to measurement
O47 impediment. This study aims to measure intangible investment and examine its contribution to
O18 regional economic growth in China. The results show that both the coastal and interior regions in
O53
China enjoyed high growth in intangible investment during 2003–2014, especially after the year
Keywords: 2008. Moreover, it is found that regional disparity in intangible capital is widening and that this
Intangible capital trend is mainly driven by the enlarging gap in investment in computer software and architecture
Total factor productivity
designs. In addition, it is observed that economic competency capital is neglected in both regions,
Regional economic growth
implying generally poor enterprise management in China. When intangible capital is considered,
China
growth accounting exercises show higher labor productivity growth together with a larger effect
of capital deepening in both regions. Coastal regions tend to benefit more from intangible capital
due to the advancement of computerization. If the contribution of computer software in the
interior region was as large as that in the coast region, labor productivity growth of the interior
would be 0.5 percentage points higher than its current level. Finally, the estimates of the con-
tribution of total factor productivity to economic growth would be biased if intangible capital is
not considered.

1. Introduction

Intangible capital in this study refers to knowledge embedded in intangible products or processes which can be transferred.
During the transformation process from the investment-driven to innovation-driven economy, it is observed that China enjoyed a
remarkable growth in intangible investment and the formation of capital stock. Growth accounting analysis also shows a significant
impact of intangibles on labor productivity growth in China, implying an increasingly important role of intangible capital in China's
economic development (Hulten & Hao, 2012; Tian, Ni, & Li, 2016).
However, to our best knowledge, little information has been reported at the regional level in China. This paper aims to fill in the
gap in the literature. Its objective is to measure intangibles at the regional level so as to understand their distributions, examine their
impacts on regional economies, and derive implications for policies to harness the causes of growth and to reduce inequality in China.
Further, the omission of intangible capital tends to distort the accurate assessment of economic growth by overstating the role of total
factor productivity (TFP). The theoretical implication of this study is to re-examine the impact of TFP on output growth.
This study has implications for accounting reform as well. To keep in line with the current international accounting standards
namely “System of National Accounts 2008”, National Bureau of Statistics of China (NBS) capitalized research and development

⁎
Corresponding author.
E-mail addresses: qing.li@research.uwa.edu.au (Q. Li), yanrui.wu@uwa.edu.au (Y. Wu).

http://dx.doi.org/10.1016/j.chieco.2017.07.002
Received 31 December 2016; Received in revised form 9 May 2017; Accepted 5 July 2017
1043-951X/ © 2017 Elsevier Inc. All rights reserved.

Please cite this article as: Li, Q., China Economic Review (2017), http://dx.doi.org/10.1016/j.chieco.2017.07.002
Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

(R & D) investment in July 2016 and revised China's GDP backward to 1952 (Xin & Wang, 2016).1 After the adjustment, the average
growth rate of China's GDP is raised upwards by 0.06 percentage points in the past 10 years (Xin & Wang, 2016). If more intangibles
in addition to R & D are integrated into China's national accounts, the impact on China's GDP could be much larger.
This paper makes several contributions to the literature. It is probably the first study of intangibles at China's regional level. It
attempts to present a comprehensive discussion of the meaning of “intangibles” in the context of China. In the literature, the phrases
like “technological knowledge capital”, “intangible knowledge capital”, and “human intangible capital” are often used inter-
changeably. In this paper, knowledge embedded in intangible products and innovation processes is distinguished from knowledge
embedded in individuals (human capital), and that disembodied as technology diffusion. Knowledge is hypothesized to affect output
through direct capital input (intangible capital and human capital) and indirect knowledge diffusions (TFP). Further, input shares in
this study are estimated by using cost-based calculation while the existing studies used shares derived directly. The estimated shares
demonstrate Gollin's (2002) viewpoint that China's labor share is exceptionally low among lower middle-income countries.
The rest of the paper is organized as follows. Section 2 presents a literature review and provides some background information.
Section 3 describes the data and measures intangible investments. Section 4 discusses the growth accounting method and reports the
empirical results. Section 5 conducts sensitivity analysis. Section 6 concludes the paper.

2. Literature review

Knowledge has been widely examined and understood as an engine to boost economic growth and sustain long-term development
across the globe. Nevertheless, the components of knowledge are blurred, implicitly understood but not explicitly measured.
Previously, knowledge is approximated with technical progress (“total factor productivity”, or TFP) to explain economic growth that
could not be attributed to a given set of inputs. After the advent of information technology (IT), a peculiar observation is found in the
U.S. that a slowdown in productivity growth rate is accompanied by an increasing investment in IT. This “productivity paradox” may
be caused by some knowledge components like organizational development (Bloom, Genakos, & Sadun, 2012; Brynjolfsson,
Hitt, & Yang, 2002). Besides, knowledge is also recognized as a synonymous expression of human capital (OECD, 2001; Sleezer,
Conti, & Nolan, 2004). All these should be regarded as knowledge capital regardless of its form. However, each may have different
impacts on economic growth.
Knowledge capital is usually split into the following components: a) knowledge capital embodied in intangible products or
processes that can be transformed in the market, such as R & D, patents, licenses, artistic originals and so on; b) knowledge capital
embodied in labor force (employment) represented by human capital; c) disembodied knowledge capital in form of technological
progress like serendipity, inspiration, and costless innovation diffusion (Władysław Welfe, 2007; Zeghal & Maaloul, 2011). This paper
will mainly focus on the first category namely intangible capital while the other two categories are also considered to explore the
potential variation in the effects of different knowledge capital on regional economic growth in China.
The measurement of different forms of intangible capital is not an easy task. Indicators like R & D, patents, and science and
technology (S & T), among others, are hence commonly used as proxies for knowledge embedded in intangible products and in-
novation processes (Crescenzi, Rodríguez-Pose, & Storper, 2012; Fleisher, McGuire, Smith, & Zhou, 2013; Kuo & Yang, 2008;
Scherngell, Borowiecki, & Hu, 2014). However, these indicators all have their limitations. For example, patent data are not ne-
cessarily representative, as they cannot capture inventions that do not meet the patentability criteria set by China state intellectual
property office (SIPO). Besides, the recorded scientific R & D and S & T expenditures exclude non-scientific activities of equal im-
portance like artistic originals.
Governed by consumer utility maximization theory and the standard model of inter-temporal choice, Corrado, Hulten and Sichel
(hereafter “CHS”) initially treated intangible capital symmetrically with tangible capital (Corrado, Hulten, & Sichel, 2005, 2006;
Hulten, 1979). The expenditure on intangible capital should be regarded as intangible investment if it “sacrifices current consumption
to gain future profit”. Specifically, if the amount of expenditure on intangibles: a) is identifiable, namely, it can be separated,
transferred, sold or rented; b) has clear ownership; c) is profitable; and d) can gain profit that is sustainable for over one year, this
expenditure should be considered as intangible investment rather than intangible immediate expenditure (Jona-Lasinio,
Lommi, & Roth, 2011). Given this definition, CHS explicitly models the production function by adding intangible capital on both sides
of the function. Traditional growth accounting exercises may provide biased results once some types of capital formation, which
should be counted as the capital input of the production function, were regarded as the residual due to the lack of information. With
the consideration of intangible capital, TFP can be refined into technological progress, knowledge diffusion, and measurement errors.
This update does not spoil growth accounting but enriches it (Hulten, 2010).
Under the CHS framework, researchers reached the consensus that intangible capital has considerable impacts on economic
growth but most studies are based on developed countries. Examples include Corrado, Hulten, and Sichel (2009) for the U.S.,
Marrano and Haskel (2006) for the UK, Fukao, Hamagata, Miyagawa, and Tonogi (2009) for Japan, Barnes and McClure (2009) for
Australia, Belhocine (2008) and Baldwin, Gu, and MacDonald (2012) for Canada, and Jalava, Aulin-Ahmavaara, and Alanen (2007)
and van Ark, Hao, Corrado, and Hulten (2009) for Germany, France, Italy, Spain and other EU countries. Dutz, Kannebley, Scarpelli,
and Sharma (2012) conducted growth accounting with intangible in one developing country Brazil. They emphasized impacts of

1
System of National Accounts 2008 (SNA 2008) is an update of the System of National Accounts 1993 (SNA 1993). It calls for the new treatment of intangible
properties like R & D, databases, artistic originals, copyright and licenses. The U.S. has revised comprehensively its national income and product accounts by including
R & D, entertainment, literary and other artistic originals. For more information, see “Preview of the 2013 Comprehensive Revision of the National Income and Product
Accounts”.

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Table 1
List of intangible capital.

Asset types National account This paper

Computerized information
1. Software Yes Yes
2. Databases No No
Innovative properties
3. Mineral exploration and evaluation (E & E) Yes Yes
4. Scientific R & D Yes Yes
5. Entertainment and artistic originals No Yes
6. Financial products and services No Yes
7. Architectural and engineering design No Yes
Economic competencies
8. Brand equity
a. Advertising No Yes
b. Market research No No
9. Firm-specific resources
a. Employer-provided training No Yes
b. Organizational structure No Yes

Source: authors' own work.

Note: “Yes” means “being included” and “No” means “being excluded”.

intangible capital on productivity growth in Brazil but noted a markedly lower share of intangibles to GDP compared with shares in
developed countries.
Is the story different in the largest developing country, China? Hulten and Hao (2012) followed by Tian et al. (2016), are pioneers
who investigated China's economic growth by incorporating intangible capital at the aggregate level. According to Hulten and Hao
(2012), the contribution of intangibles to productivity growth was around 17% during 2000–2008. It is much smaller than those in
developed economies except Japan. Therefore China may still rely heavily on tangible capital. Tian et al. (2016), written in Chinese,
combined micro and macro datasets to measure intangible capital at the national level. They also confirmed a sizable accelerated
growth of intangible capital during 2001–2012 and observed unbalanced development across various intangible assets (Tian et al.,
2016).

3. Intangible capital measurement

CHS intangible measurement is built on the cost-based method adopted by Nakamura (1999). Following CHS, intangible capital in
this paper is divided into three categories: a) computerized information; b) innovative properties, and c) economic competencies.
Various intangible investments are summed up to obtain the aggregate volumes. Table 1 presents a list of intangibles in this study,
and describes whether they are currently included in China's national accounts.

3.1. Data issues

Computerized information indicates knowledge embedded in computer software and databases. In this paper, database and in-
house software are excluded due to data constraint. In terms of computer software, we use the revenue from software industries as the
proxy for software investment and adjust it for imports and exports. The data source is the China Statistical Yearbook of Electronic
Industry and China National Statistical Yearbook (NSY, 2004–2015; CSYEI, 2004–2014). Total software revenues can be decomposed
into revenues from software products, software technical services, system integration, embedded applications and IC designs. As the
revenue from software products is already regarded as fixed capital investment in China's national accounts, it is extracted from the
total tangible investment in this study to avoid double counting (Tian et al., 2016).
Innovative properties indicate knowledge acquired through innovation activities. These include both the scientific and the non-
scientific R & D, such as the original creations that lead to copyright and licenses, engineering and architecture designs, new financial
products and services, new reserve acquisitions and so on. Among these, mineral exploration and scientific R & D are the only
categories that we can use direct expenditures. Expenditure statistics of mineral exploration are obtained directly from China
Statistical Yearbook of Mining (CSYM, 2004–2015). We exclude the costs of mineral exploration from fixed capital formation to avoid
double counting.
Scientific R & D expenditure is available in China National Statistical Yearbook (NSY, 2004–2015). It consists of basic research,
applied research and experimental development expenditure while experimental development accounts for the largest share.
However, it should be noticed that experimental development is excluded in the prudent analysis in developed countries, as it refers
more to imitation rather than original innovation. Further, R & D spending in the “computer and related activities” category is likely
to encounter the double counting problem. A sensitivity analysis is conducted in Section 5 to check the robustness of the results.
For entertainment and artistic originals, CHS used twice the value of investment in motion pictures to crudely estimate the costs
for new products in broadcasting, sound recording, and publishing industries. In Chinese case, Hulten and Hao (2012) used one-
quarter of the revenues from the publishing industry but excluded the media industry. Tian et al. (2016) however omitted this item

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completely. In this paper, one-quarter of the revenues of books, magazines, and newspapers is used as investments in publishing
industries. The same value is used to represent the development costs of media industries of broadcasting, TV, sound recording and
movies. The data source is from China Journalism Yearbook and interpolation is used for years with missing values (CJY,
2004–2015).
Following CHS and Hulten and Hao (2012), 20% of the intermediate expenditures in financial service industries are used as the
proxy of financial new product development costs. We derive the value added of the financial sector from China National Statistical
Yearbook (NSY, 2004–2015) and obtain the ratio of intermediate consumption to value added from annual World Input-Output
Database (WIOD). The national I-O table ratios are used for all Chinese regions in this study. Based on studies by CHS and Hulten and
Hao (2012), 50% of the revenue from the “engineering inspection and design” category is regarded as investment in architecture and
engineering designs. The revenue for the period of 2005–2014 is obtained from the National Annual Reports of Firms of Engineering
Inspection and Design issued by the Ministry of Housing and Urban-Rural Development (NARFEID, 2006–2015). For 2003 and 2004,
we follow Hulten and Hao (2012) and estimate the growth rates of revenue by using growth rates of construction value added. Here
the underlying assumption is that architecture design development is always highly correlated with construction development.
Economic competencies indicate knowledge embedded in firm-specific competency properties. It includes two sub-categories,
namely, brand equity and firm-specific human resources. Spending on brand development is represented by expenditures on ad-
vertising and market research, and expenditures on employer-provided training and organizational development are used to measure
the costs for improving firm's productivity and profit. In terms of brand development, market research is excluded due to data
constraint. For advertising, we follow CHS to use 60% of revenues from advertising industries as the proxy. 60% of the advertising
expenditures in CHS framework are presumed to have long-lasting effects, and the remaining 40% are regarded as seasonal, tem-
porary or public service advertising with a relatively short service life. The revenue is obtained from China Advertising Yearbook
(CAY, 2004–2015) and interpolation is used to fill in missing values. As in-house advertising has no arm's-length transaction, the
measurement is conservative as it only captures purchased advertising expenditures in Chinese regions.
Investment in firm-specific human resources includes the costs of employer-provided training and organizational development.
Each of them emphasizes the employee and employer's efforts to enhance the productivity of the firm separately. In terms of or-
ganizational development, CHS use 20% of the value of executive time spent on in-house organizational development, and use
management consultant fees for purchased organizational investment. Due to the lack of data, we exclude management consulting
and follow Hulten and Hao (2012) to use 5% of management fees as in-house organizational development in Chinese regions. Besides,
investment in employer-provided training is assumed to be half of investment in organizational development. The data source is
China Industrial Statistical Yearbook and China National Statistical Yearbook (NSY, 2004–2015; CISY, 2004–2015). We calculate the
ratio of management expenses to value added in the manufacturing industry and use the same ratio for agriculture and service
industries. A sensitivity analysis is implemented in Section 5 to check the robustness of the results with regards to the assumptions
about employee training and organizational investment.

3.2. Intangible investment measurement

In order to examine regional variation, China's provinces and municipalities are grouped into two broader regions, that is, the
coast and the interior.2 This classification is consistent with most studies which focus on inter-provincial disparity, particularly
disparity between the booming coast and the backward interior (Chen & Groenewold, 2013; Lemoine, Poncet, & Ünal, 2015). The
distinction between coastal and inland China largely corresponds to a contrast in the level of development and the degree of
openness. According to Table 2, intangible investment enjoyed fast growth in both regions in the last decade. In contrast to the slower
growth of tangible investment, the annual growth rates of intangible investment in both regions were higher during 2003–2014 and
reached over 20% after 2008. The ratios of intangibles to GDP have thus doubled in the interior and tripled on the coast between
2003 and 2014. However, both regions still put more emphasis on tangible development rather than intangible capital investment
especially the interior where infrastructure construction still relies on tangible capital investment.
In addition, it is found that the gap in intangible investment between Chinese regions is widening. Coast-interior investment gap
has been enlarged since 2003 (Columns (1) and (2), Table 2). It is also noticed that intangible investment in China is highly con-
centrated in a few developed areas. According to Fig. 1, regions with high gross regional product per capita (GRPPC), particularly the
coastal developed areas, tend to invest more in intangibles. Beijing and Shanghai, two privileged metropolises in China, dominate the
coastal areas with intangible investment being more than one-fifth of their gross regional product (GRP) in 2014.
Computerization and architecture design can largely explain the intangible disparity between the coast and interior. According to
Table 3, these two categories are responsible for 54% of coast-interior investment differences on average during 2003–2008, and this
figure increased to 76% in 2014.3 With preferential policy support and favorable economic conditions, coastal regions acted earlier
for industrial upgrading. In 2013, over half of the software firms are agglomerated in the coastal area, and they accounted for 74.8%
of the total revenues (CSYEI, 2004–2015). Meanwhile, the acceleration of urbanization continuously promotes the development of

2
The coastal regions include Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, and Hainan. The interior regions include
Shanxi, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, Hunan, Inner Mongolia, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai,
Ningxia, and Xinjiang.
3
According to Columns (1) and (2) in Table 3, the difference in computerized information (1.21–0.26) and in architecture and engineering designs (0.47–0.22)
between the coast and interior can explain 54% of the overall difference ((1.21–0.26) + (0.47–0.22)) / (3.80–1.58) during the period of 2003–2008. 76% is obtained
in the same way for the year 2014.

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Table 2
Intangible investment vs. tangible investment (2010 constant price).

Year Intangible investment Tangible investment Intangible growth Tangible growth Intangible/GDP

Coast Interior Coast Interior Coast Interior Coast Interior Coast Interior

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

2003 579 283 3630 2958 2.84 1.39

2004 789 342 4225 3505 36.31 21.11 16.39 18.53 3.50 1.52
2005 975 398 5667 4336 23.62 16.46 34.15 23.69 3.86 1.58
2006 1130 447 6638 5332 15.89 12.18 17.13 22.98 3.96 1.56
2007 1347 534 7534 6451 19.15 19.54 13.51 20.98 4.13 1.64
2008 1584 618 8567 7587 17.63 15.64 13.71 17.62 4.42 1.72
2009 1969 783 10,139 9505 24.28 26.74 18.34 25.27 5.00 1.99
2010 2457 941 11,459 11,381 24.81 20.19 13.02 19.74 5.62 2.15
2011 3035 1087 12,709 13,022 23.50 15.54 10.91 14.42 6.29 2.26
2012 3810 1298 13,952 14,822 25.53 19.33 9.78 13.82 7.27 2.48
2013 4622 1569 15,121 16,521 21.31 20.95 8.38 11.47 8.12 2.76
2014 5517 1897 15,966 17,683 19.37 20.86 5.58 7.03 8.96 3.08

Source: authors' own estimates.

Note: numbers in Columns (1)–(4) are in billion Renminbi (RMB) and those in Columns (5)–(10) are in percentage. GDP in this table is the expanded GDP that includes
intangible investment. The source of intangible investment is described in Section 3.1, while tangible investment and GDP statistics are drawn from China National
Statistical Yearbook (NSY, 2004–2015). Price deflators are described in detail in Section 4.

40
coast interior Beijing
35

30

25

20 Shanghai
Jiangsu
15
Sichuan Tianjin
10

5 Jilin
Hainan Inner-Mongolia

GRPPC (1000 RMB)

Fig. 1. Intangible/GRP ratio and GRPPC in 2014 (2010 price).

Source: authors' own estimates.

Table 3
Intangible investment/GDP (%) (2010 constant price).

2003–2008 2009–2014 2003–2014 2014

Coast Interior Coast Interior Coast Interior Coast Interior

(1) (2) (3) (4) (5) (6) (7) (8)

Computerized information 1.21 0.26 3.04 0.61 2.13 0.43 4.27 0.87
Innovative property 1.75 0.91 2.85 1.34 2.30 1.13 3.59 1.69
Mineral exploration and evaluation 0.06 0.13 0.06 0.18 0.06 0.16 0.08 0.29
Scientific R & D 0.83 0.34 1.26 0.52 1.05 0.43 1.40 0.57
Entertainment and artistic originals 0.14 0.12 0.15 0.11 0.14 0.12 0.18 0.12
Financial products and services 0.24 0.10 0.33 0.16 0.29 0.13 0.37 0.22
Architecture and engineering design 0.47 0.22 1.06 0.36 0.76 0.29 1.56 0.49
Economic competencies 0.84 0.40 1.00 0.51 0.92 0.46 1.12 0.53
Advertising 0.29 0.07 0.32 0.08 0.31 0.08 0.42 0.11
Employer-provided training 0.18 0.11 0.23 0.14 0.20 0.13 0.23 0.14
Organizational structure 0.37 0.22 0.45 0.28 0.41 0.25 0.46 0.28
Total 3.80 1.58 6.89 2.46 5.35 2.01 8.96 3.08

Source: authors' own estimates.

Note: GDP in this table is the expanded GDP that includes intangible investment. The source of intangible investment is described in Section 3.1, while GDP statistics
are draw from China National Statistical Yearbook (NSY, 2004–2015). Price deflators are described in detail in Section 4.

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infrastructure and civil engineering in coastal regions. Investment in architecture designs on the coast has now surpassed scientific
R & D to become the second largest component, accounting for 17% (1.56/8.96), only behind the computer software.
Apart from regional disparity, one common feature in the two regions is the relatively small share of economic competency capital
as illustrated in Table 3. During 2003–2014, the investment in economic competency only equals one-sixth (0.92%/5.35%) of the
intangible investment on the coast and accounts for 23% (0.46%/2.01%) in the interior. However, economic competencies accounted
for about one-quarter to over half of the overall intangible investment in developed countries such as the U.S. (49%), U.K. (55%),
Australia (49%), Canada (39%) and Japan (26%), to cite a few (Barnes & McClure, 2009; Belhocine, 2008; Corrado et al., 2009; Fukao
et al., 2009; van Ark et al., 2009). The share of economic competency investment in both regions even decreased to 12.5% (1.12%/
8.98%) and 17.2% (0.53%/3.08%) in 2014. Relatively small endowment of firm-specific competency capital implies the relatively
poor management capability of Chinese corporations. The ignorance of vocational training of employees and organizational devel-
opment will surely impair the future competitiveness of Chinese enterprises.

4. Growth accounting with intangibles

A Cobb-Douglas format is adopted for growth accounting with intangible capital:

Yi, t = Ai, t (K iT, t )α (K iI, t ) β (Li, t Hi, t )1 − α − β (1)
th T I
where Yi , t is the real GRP plus intangible investment of the i region in the year t, Ki , t is the stock of tangible capital, Ki , t is the stock
of intangible capital, Li , t is the total employment, Hi , t is human capital and Ai , t is the TFP residual. α and β are output elasticity of
tangible capital and intangible capital, respectively. Dividing Eq. (1) by total employment on both sides gives:
yi, t = Ai, t (kiT, t )α (kiI, t ) β (Hi, t )1 − α − β (2)
where yi , t, ki , tT, I
ki , t denotes labor and capital productivity. Eq. (2) can be converted into the growth rate form:
T I
gi,yt = gi,At + αgik, t + βgik. t + (1 − α − β ) gi,Ht (3)
where gi , t = Δ ln xi , t (x = y , A , k , k , H). Eq. (3) implies that labor productivity growth is decomposed into a residual (TFP growth),
x T I

tangible capital deepening, intangible capital deepening and human capital deepening. The Tornqvist (1936) index is used for
discrete time approximations. Under the assumption of constant returns to scale and competitive equilibrium, the output elasticity of
tangible capital, intangible capital and human capital is equal to the corresponding input share (Hulten, 2010). This input share si , tZ
is calculated as:
T I
siZ, t = (PiZ, t Zi, t PiK, t K iT, t + PiL, t Li, t + PiK, t K iI, t ) (4)
where Z represents tangible capital, labor and intangible capital respectively. si , tZ
indicates the share of an input factor, namely
T I
tangible capital ("si , tK "), labor ("si , tL"), and intangible capital ("si , tK "). Pi , tL is the income accruing to per capita labor input which is
T I
estimated by wages and salaries. Pi , tK and Pi , tK , known as “rental payments” of capital, are calculated by following Oulton and
Srinivasan (2003) who in turn followed Jorgenson and Griliches (1967). Given these definitions, Eq. (3) is thus converted into:
T T I I
gi,yt = gi,At + siK, t gik, t + siK, t gik. t + siL, t gi,Ht (5)
The rental payments of capital is calculated by assuming that renting and owing one capital is the same for firms as the service
that the capital provides into output is the same (Jorgenson & Griliches, 1967; Marrano & Haskel, 2006; Oulton & Srinivasan, 2003).
The market-clearing rental payment for capital j (where j can be tangible or intangible capital), Pij , tR, can be derived as:
PijR, t = Ti, t (Rij, t (ri, t + δij, t ) − πij, t ) (6)
where πij , t denotes the expected capital gain (or loss) (πij , t = Rij , t − Rij , t − 1) , δij , t is the annual capital loss via wear and tear
measured by the depreciation rate for asset j and ri , t is the common rate of return that is assumed to be equal across all intangible and
tangible capital (Corrado et al., 2009; Hall & Jorgenson, 1967).4 Ti , t is the after-tax adjustment term.5 Rij , t is the purchasing price of
capital j which is measured by investment price deflator of capital j in this study.
Finally, the overall payments (Πi , t) to capital is the sum of rental payment to each capital type which can be written as:
n m
Πi, t = ∑ j=1 PijR, t K ijI, t + ∑h=1 PihR, t K ihT , t
(7)
where there are n types of intangible capital and m types of tangible capital (n = 9 and m = 1 in this study). As the rental payment of
each capital is expressed as a function of r in Eq. (6), the unknown Pij , tR and ri , t can be obtained by combining Eqs. (6) and (7).
The perpetual inventory method (PIM) is used to estimate both the tangible ("Kij , tT") and intangible ("Kij , tI") capital stock.

4
The right-hand side of Eq. (6) indicates that if firms buy one capital good for R, they earn a net rate of return r, but suffer a capital loss via wear and tear δ and a
loss or gain in value changes in the future. There will be indifference for a profit-maximizing firm between renting the capital good for PtR (unobserved rental payment)
and buying it.
5
After-tax adjustment is calculated as one minus the regional tax rates, which are estimated as the share of net taxes on production (shengchanshui jinge) to GRP.
Statistics are obtained from China National Statistical Yearbook (NSY, 2004–2015).

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Table 4
Price deflators and depreciation rates.

Asset types Deflators Depreciation

Computerized information Deflator of fixed capital investment 0.33

Innovative property
Mineral exploration and evaluation (E & E) GDP deflator 0.20
Scientific R & D GDP deflator 0.20
Entertainment and artistic originals GDP deflator 0.20
Financial products and services GDP deflator 0.20
Architecture and engineering design GDP deflator 0.20
Economic competencies
Advertising Implicit wages and salaries deflator 0.60
Employer-provided training Implicit wages and salaries deflator 0.40
Organizational structure Implicit wages and salaries deflator 0.40

Source: authors' own work.

Note: deflators of fixed capital investment by regions are available from 1993 in China National Statistical Yearbook (NSY, 2004–2015). The GDP deflator is
calculated by dividing nominal GDP by real GDP. The deflator of wages and salaries is calculated by dividing the nominal average wage by real average wage.
The data source is China National Statistical Yearbook (NSY, 2004–2015). Depreciation rates are obtained from CHS.

Symbolically:
Kij, t = (1 − δij ) Kij, t − 1 + ΔKij, t (8)

where ΔKij , t is the real annual investment flow of capital j. The growth rate model is adopted to estimate initial capital stock, which
can be expressed as:

Kij,0 = ΔKij,1 (δij + gij ) (9)

where Kij , 0 is the initial year capital stock, ΔKij , 1 is the annual flow in the first year and gij is the average growth rate of the initial
five-year investment flow. To obtain the real investment flow of intangible capital, we follow Fukao et al. (2009) and CHS to use
different price deflators and depreciation rates for different intangible capital (Table 4). Finally, all types of intangible capital stock
are summed up to get the aggregate volume in each region. To save space, intangible capital stock by regions is reported in Table A1
in the appendix.
With regarding to tangible investment flows, four indicators are commonly used in the existing literature, namely, accumulation,
gross capital formation (including inventories), fixed capital formation and total investment in fixed assets (Chow, 1993; Wang & Yao,
2003; Zhang, Wu, & Zhang, 2007). Here we use fixed capital formation to avoid the disturbance of inventory value change and biased
land acquisition costs in China.6 The regional deflators of fixed capital investment are available in China National Statistical Yearbook
after 1993 (NSY, 2004–2015). Also, different depreciation rates are used for different regions (Wu, 2016). Mineral investment and
software product investment are subtracted from the annual investment flows to avoid double counting problem.
For human capital measurement, partial measurement based on average effective schooling years is adopted here (Wang & Yao,
2003). The share (Sit) of workers for each of the six categories of education (primary, junior secondary, senior secondary, college,
university, postgraduate) can be derived from China Labor Statistical Yearbooks (CLSY, 2004–2015). Meanwhile, the estimates of the
schooling cycles are assumed to be 6, 9, 12, 15, 16 and 18.5 years, respectively (Treiman, 2013).7 Thus, human capital (Hi , t) can be
estimated as:
Hi, t = 6Sit , primary + 9Sit , junior + 12Sit , senior + 15Sit , college + 16Sit , uni + 18.5Sit , post (10)

To summarize, growth accounting in this paper is conducted in six steps. The first step is to measure nominal investment flow for
each type of intangible and tangible assets and express it in real terms by using appropriate price deflators. The second step is to use
PIM to estimate capital stock for each asset from 2003 onwards and add them together to obtain the aggregate for each region. The
third step is to recalculate GRP for each region by including intangible investments. The fourth step is to estimate human capital by
using the average effective education attainment data. The fifth step is to obtain the share of each input factor (human capital,
tangible and intangible capital). Finally growth accounting exercise is conducted.
Intangible capitalization gives different pictures to economic performance in both regions. As shown in Table 5, with intangible
capital the growth rate of labor productivity on the coast raised upwards by 0.55 (9.68%–9.13%) percentage points per annum (pppa)
and in the interior by 0.22 pppa (10.88%–10.66%) during 2003–2014. A larger contribution of intangible capitalization further
raised labor productivity growth rates after 2008. Coastal regions saw a 1.05 pppa (7.93%–6.88%) increase of labor productivity

6
Accumulation statistics discontinued after 1993. Total investment in fixed assets is unique to the China national accounts and includes the acquisition costs of land,
which has deviated from intrinsic value in recent years. Gross capital formation includes fixed capital formation and inventory change. The latter often depends on
market demand rather than wear and tear (Young, 2003).
7
It normally takes 6 years to complete primary education, 9 years to complete junior secondary school, 12 years to complete senior high school, 15 years to
complete a 3-year college (“dazhuan”), 16 years to complete a 4-year bachelor degree. Further, one usually needs 19 years (or 18 years) to obtain a 3-year (or 2-year)
master degree. So we use 18.5 years as the average.

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Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

Table 5
Growth accounting analysis with and without intangible capital (2010 constant prices).

Coast Interior

2003–2008 (1) 2009–2014 (2) 2003–2014 (3) 2003–2008 (4) 2009–2014 (5) 2003–2014 (6)

Growth accounting results

(1) Without intangibles (%)
Growth rate of labor productivity 11.83 6.88 9.13 12.12 9.44 10.66
Capital deepening 8.35 5.93 7.03 9.87 8.03 8.87
Tangible capital deepening 8.35 5.93 7.03 9.87 8.03 8.87
Human capital deepening 0.21 1.00 0.64 0.15 1.19 0.71
TFP 3.28 (0.06) 1.46 2.11 0.22 1.08
(2) With intangibles (%)
Growth rate of labor productivity 11.77 7.93 9.68 12.08 9.88 10.88
Capital deepening 8.78 7.22 7.92 9.86 8.60 9.17
Tangible capital deepening 7.54 5.46 6.40 9.25 7.84 8.48
Intangible capital deepening 1.24 1.76 1.52 0.61 0.76 0.69
Software 0.54 0.93 0.75 0.18 0.25 0.22
Others 0.70 0.83 0.77 0.43 0.51 0.47
Human capital deepening 0.19 0.90 0.58 0.14 1.11 0.67
TFP 2.81 (0.19) 1.17 2.08 0.17 1.04

Input share
(1) Without intangibles (%)
Labor 45 50 48 46 48 47
Tangible capital 55 50 52 54 52 53
(2) With intangibles (%)
Labor 38 41 40 44 45 44
Tangible capital 54 50 51 52 51 51
Intangible capital 8 9 9 4 4 5

Source: authors' own estimates.

Note: small discrepancy in summation is due to rounding errors. The source of intangible investments is described in Section 3.1. The data source of human capital is
from China.
Labor Statistical Yearbook (CLSY, 2004–2015) while tangible capital investment statistics are from China National Statistical Yearbook (NSY, 2004–2015).

growth when intangibles are included while interior regions had an increase of 0.44 pppa (9.77%–9.44%) between 2009 and 2014.
The productivity gap with and without intangibles implies an underestimation in conventional studies when intangibles are excluded,
especially in coastal areas where intangible investment grew rapidly.
It is found that, on the coast, computerization is responsible for 49% (0.75%/1.52%) of the intangible capital deepening effect and
7.75% (0.75%/9.68%) for labor productivity growth during the period of 2003–2014. In contrast, the overall contribution of all
intangible capital in interior regions can only explain 6.34% (0.69%/10.88%) of labor productivity growth in the same period. There
are several reasons for coastal expansion in intangible investment. For example, the coastal regions have competitive advantages in
industrial structure and more flexible financial and labor markets. Industrial reform strengthens the status of tertiary industry de-
velopment, which tends to rely more on intangible investment (van Ark, Melka, Mulder, Timmer, & Ypma, 2002). The more matured
financial market helps innovation firms with external financing, and the flexible labor market accelerates innovation through faster
knowledge spillovers and movement of skilled labor.
Besides, the influence of TFP on productivity growth is smaller but not swayed by the introduction of intangible capital in both
regions. TFP continues to be a significant source of growth in interior areas in China when intangibles are included. With the
inclusion of intangible capital, the contribution of TFP growth in the interior on average decreased slightly and remained at 9.56%
(1.04%/10.88%), which is much larger than the contribution (0.69%/10.88%) of intangible capital during 2003–2014 (Table 5). As
TFP can be largely explained by spillovers, this point implies that interior regions in China still prefer technology transfer and
diffusion rather than original innovation (van Ark et al., 2009). This may be partly because technology spillovers are less costly, and
partly because interior regions cannot afford the risk of innovation investment with uncertain outcomes. Due to these factors, interior
regions have less incentive to invest more in intangible capital and prefer to absorb knowledge directly.
Further, it should be noted that with the introduction of intangible capital, human capital still plays an importance role in regional
development in China. According to Table 5, human capital deepening still contributes to 5.99% (0.58%/9.68%) of labor pro-
ductivity growth on the coast and 6.16% (0.67%/10.88%) in the interior during 2003–2014 when intangibles are included. In
addition, the contribution of human capital in both regions increased considerably after 2008, which indicates a larger share of
higher skilled labor force across China. However, as the coast tends to serve as a pool for top talents in China, a large difference in
coastal-interior contribution of human capital would be expected. Population-based rather than workforce-based estimation of
human capital may be responsible for the much smaller difference observed.
Finally, the income shares of labor and capital inputs are critical for growth accounting exercises. Under constant returns to scale,
the smaller share of labor input is, the larger share of capital input is, and hence the greater impact of capital deepening effect on
labor productivity. It is found that the estimated labor share in this study is far below the average level in developed countries

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Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

Table 6
Comparison of growth accounting results.

Authors' estimates Hulten and Haoc Tian et al.

a b
Current EIB NBS EIB NBS EIB NBS

Growth accounting results

(1) Without intangibles (%)
Growth rate of labor productivity 9.07 9.07 9.07 9.65 9.65 9.00 9.00
Capital deepening 6.70 3.77 7.16 3.54 6.26 2.89 5.48
Tangible capital deepening 6.70 3.77 7.16 3.54 6.26 2.89 5.48
Human capital deepening 0.73 1.07 0.66
TFP 1.64 4.23 1.25 6.11 3.39 6.11 3.51
(2) With intangibles (%)
Growth rate of labor productivity 9.52 9.52 9.52 9.72 9.72 9.42 9.42
Capital deepening 7.39 4.02 7.49 4.70 6.70 4.93 7.26
Tangible capital deepening 6.17 3.11 6.26 3.12 5.23 2.50 4.43
Intangible capital deepening 1.22 0.91 1.23 1.58 1.47 2.43 2.83
Human capital deepening 0.68 1.07 0.66
TFP 1.45 4.44 1.38 5.03 3.02 4.50 2.17

Input share
(1) Without intangibles (%)
Labor 47 70 43 70 43 70 43
Tangible capital 53 30 57 30 57 30 57
(2) With intangibles (%)
Labor 44 61 41 61 41 61 41
Tangible capital 49 26 46 26 46 26 46
Intangible capital 7 12 14 12 14 12 14

Source: columns (1)–(3) are authors' own estimates. Columns (4)–(5) are from Hulten and Hao (2012) and Columns (6)–(7) are from Tian et al. (2016).
a
The EIB share is the average of the US, UK, Germany, France, Italy, Spain, Austria and Denmark estimated by van Ark et al. (2009).
b
The NBS share is obtained from China Statistical Yearbooks and used by Hulten and Hao (2012) and Tian et al. (2016).
c
The time span is 2000–2008 for Hulten and Hao (2012) and 2005–2007 for Tian et al. (2016). Small discrepancy in summation is due to rounding errors.

(Hulten & Isaksson, 2007). The lower labor share in China may be explained partly by income misattribution and partly by data
deficiencies (Gollin, 2002). To explore this issue further, we compare the results using different shares. Table 6 compares the national
results by using the estimated shares in this paper and two other shares named “EIB” and “NBS”. The “EIB share” is the average value
for the U.S., UK, Germany, France, Italy, Spain, Austria and Denmark reported by van Ark et al. (2009), and the “NBS share” is
obtained from China National Bureau of Statistics and used by Hulten and Hao (2012) and Tian et al. (2016). According to Table 6,
the results based on the “EIB share” tend to show a larger TFP growth rate and a smaller capital deepening effect due to a much larger
share of labor. In general, the results based on the same input shares show no significant differences. A larger tangible capital
deepening effect in this study can be explained by different estimations of tangible capital inputs and coverage of different time
periods.

5. Sensitivity analysis

Given the assumptions made in Sections 3 and 4, a series of sensitivity analyses are conducted here to check the robustness of
growth accounting results. Table 7 reports the findings for six optional cases against the base case. First, as software development can
only be classified as R & D if its aim includes the resolution of scientific or technological uncertainty on a systematic basis. To avoid
potential double counting of R & D and routine software investment, spending in the “computer and related activities” category is
subtracted from total R & D spending (Marrano & Haskel, 2006). According to our estimates, R & D spending in computer and related
activities on average accounts for around 15% of the total R & D spending at China's national level in recent five years (NSY,
2004–2015). This ratio is used to deduct R & D spending in software from the total in Chinese regions and we repeated the growth
accounting exercise. The results are reported in Table 7 (Case 1).
Second, in Section 3, investment in firm-specific human resources is estimated with the assumption that 5% and 2.5% of man-
agement fees is equivalent to the value of time and money spent in organizational development and employee training, respectively.
Here we follow Tian et al. (2016) to incorporate the micro-level evidence in China. The Chinese Household Income Project (CHIP)
survey results show that training expenditure on average accounts for 1.46% of employees' wages and salaries in 2007 (Tian et al.,
2016). The same rate is used for all Chinese regions for the period of 2003–2014. For organizational development, the share of
employer's payment is 5.12% of the total labor compensation based on the China Health and Nutrition Survey (CHNS) and 20% of
employer's payment is estimated as investment in organizational development. The results of the growth accounting exercise are
listed as Case 2 in Table 7.
Third, intangible capital stock depends on the annual increment (investment) as well as the annual wear and tear (depreciation).
These two components are measured by using ratios or shares from studies of developed countries. To explore the potential effects of

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Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

Table 7
Accounting for growth: sensitivity analysis (2003–2014).

Coast Interior China

Labor productivity (%)

Base case 9.68 10.88 9.52
Case 1 9.68 10.87 9.51
Case 2 9.66 10.86 9.50
Case 3 10.04 10.75 9.52
Case 4 9.68 10.88 9.52
Case 5 9.68 10.88 9.52
Case 6 9.79 10.71 9.52

Tangible capital deepening (%)

Base case 6.40 8.48 6.17
Case 1 6.42 8.49 6.18
Case 2 6.41 8.46 6.17
Case 3 7.70 8.69 6.60
Case 4 6.42 8.50 6.16
Case 5 6.40 8.48 6.17
Case 6 6.48 8.36 6.17

Intangible capital deepening (%)

Base case 1.52 0.69 1.22
Case 1 1.49 0.67 1.19
Case 2 1.51 0.71 1.20
Case 3 0.58 0.35 0.63
Case 4 1.57 0.72 1.25
Case 5 1.52 0.69 1.22
Case 6 1.60 0.65 1.22

Human resource deepening (%)

Base case 0.58 0.67 0.68
Case 1 0.58 0.67 0.69
Case 2 0.58 0.67 0.68
Case 3 0.65 0.69 0.68
Case 4 0.58 0.67 0.68
Case 5 2.80 3.02 3.69
Case 6 0.58 0.67 0.68

TFP growth (%)

Base case 1.17 1.04 1.45
Case 1 1.19 1.04 1.46
Case 2 1.17 1.02 1.44
Case 3 1.12 1.02 1.61
Case 4 1.11 0.98 1.43
Case 5 (1.05) (1.31) (1.56)
Case 6 1.13 1.04 1.45

Source: authors' own estimates.

Note: small discrepancy in summation is due to rounding errors. The “coast” column and “interior” column in Case 6 refer to
the “leader” and “follower” groups, respectively.

different depreciation rates and different incremental investment in Chinese case, we halve all investment amounts and repeat the
growth accounting exercise as Case 3 and double the depreciation rates for all types of intangibles and repeat the growth accounting
exercise as Case 4 in Table 7, respectively. For intangible investment in advertising, the depreciation rate is set to be 90% as it was
assumed to be 60% in Section 3.
Fourth, human capital in Section 3 is based on partial measurement by using effective schooling years. Recently, China Center for
Human Capital and Labor Market Research (CHLR) of the Central University of Finance and Economics undertook a comprehensive
study of human capital based on individuals' lifetime income (Li, Liu, Li, Fraumeni, & Zhang, 2014). The Jorgenson-Fraumeni lifetime
income approach is expanded to estimate individual earnings as a function of not only schooling but also experience
(Jorgenson & Fraumeni, 1989, 1992a, 1992b). For a robustness check, CHLR's estimates of per capita human capital (PCHC) are
employed and the results of the exercise are reported as Case 5 in Table 7. Consistently, CPI price deflators are adopted here.
Finally, regions in this study are grouped by their geographic locations in China. This distinction reflects regional economic
development level and degree of openness to a large extent but still needs deliberation. It is noted that some interior regions like
Sichuan province perform better than some coastal areas like Hainan (see Fig. 1). In Case 6 (Table 7), we calculate the GRPPC in the
initial year and define provinces with GRPPC above the national mean as the leader group and those below the national mean as the

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Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

follower group. The leader group includes nine coastal regions and one interior region while the follower group has two coastal
regions and nineteen interior regions.8
Table 7 shows no significant difference between Cases 1, 2 and 4 and the base case. Thus, decreased R & D investments, changes in
firm-specific human resources and high depreciation rates have little effects on growth accounting results. In Case 3, however,
halving intangible investment leads to a substantial slump in intangible capital deepening and an increase in tangible capital dee-
pening. Further, the human capital deepening effect in Case 5 is significantly higher than that in other cases. With a bigger con-
tribution of human capital, the residual TFP turns to be negative in the observed periods. The estimates of human capital by CHLR
increase its impact substantially. Li et al. (2014) used the CHLR datasets and attributed 45.9% of China's economic growth to human
capital deepening during 1986–2010. TFP only accounts for 0.81% of economic growth (Li et al., 2014). These numbers may be
debatable. The results using CHLR human capital data (Case 5, Table 7) are clearly outliers. Finally, if we reclassify regions into the
leader and follower groups (Case 6, Table 7), labor productivity growth of the leader regions without the consideration of intangible
capital was 9.22% (not shown here). The labor productivity growth difference is 0.57pppa (9.79%–9.22%) in Case 6. In base case, the
difference of labor productivity growth with and without intangibles is 0.55pppa (9.68%–9.13%). Labor productivity growth dif-
ference is slightly larger when regions are classified according to their GRPPC. This is not surprising as GRPPC in most coastal regions
is higher than that in the interior regions. Thus the difference of labor productivity growth with and without intangible capital
between Case 6 and base case is trivial while capital deepening effects and TFP growth both changed very little.

6. Conclusion

This paper presented estimates of intangible capital and examined the contributions of intangible capital to regional economic
growth in China. By categorizing knowledge capital, intangible capital is distinguished from knowledge embedded in individuals and
knowledge generated from spillovers. Intangible capital together with human capital and TFP contributed to China's regional eco-
nomic development in the last decade, and the coastal regions are predicted to play a leading role in economic transformation.
However, both the coast and the interior still rely heavily on tangible capital, implying the challenges for economic restructuring in
China. The main findings in this paper can be summarized as follows.
First, intangible capital enjoyed remarkably fast growth in China but was subjected to a widening regional disparity. Developed
areas are more likely to invest in intangibles for their expanding service industry and lively technology transaction market. For this
reason, intangible capital shows high centralization in China's few richest coastal regions. Meanwhile, computerization and archi-
tecture designs are the main factors underlining the enlarged disparity. While the computerization boost is more likely to be linked
with policy preference on the coast, the boom in demand for architecture designs may have complex reasons associated with ur-
banization, labor migration, and the real estate bubble. Since these two types of intangibles are highly related with ICT and re-
sidential construction investment, we should interpret the results carefully as investment quality is not considered.
Second, the small share of economic competency in both regions implies poor enterprise management across China. Firms spent
less or nothing in employee training and organizational development and the situation barely changed in the last decade. This may be
because of China's management culture of encouraging informal off-the-job learning. However, it is still far below the average of
other countries. The lack of investment in economic competencies indicates that firms in China are poor at “soft skills”. This weakness
may affect firms' efficiency and hence China's comparative advantage in manufacturing which is disappearing due to rising labor
costs.
Third, there is no doubt that intangible capitalization can raise capital deepening effects and hence contribute to output growth in
China. Notwithstanding, TFP still plays its role, indicating the importance of knowledge spillovers and technological progress in both
regional economies. Meanwhile, in comparison with the coast, interior regions in China may have less incentive to innovate and
prefer to absorb knowledge directly. The explanations can be manifold. One possible reason is that obtaining existing knowledge is
more economical for less developed areas. The lack of financial funds, policy support and researchers causes interior provinces to rely
heavily on knowledge spillover from the developed areas rather than their own indigenous innovation. Besides, innovation is risky
and costly. The interior regions may not be able to pay for it.
Finally, the interpretation of the results needs caution. For example, input shares estimated in this study are very different from
the income shares for developed economies though they are similar to the shares reported by the NBS. In China, labor income
represented by total labor payment may not capture the real income accruing to households. Self-employed and rural labor income
may be misattributed to capital, thus overstating the capital share and understating the labor share. Besides, as the education-based
measurement of human capital cannot reflect the impacts of labor migration, better estimates of human capital may be needed for
regional studies. Finally, knowledge spillover, which is an important determinant for regional growth, is regarded as part of TFP
growth and is not measured explicitly. These questions call for further work.

Acknowledgement

We would like to thank the China Scholarship Council (CSC) and UWA Business School for supporting this project through a

8
The leader group's nine coastal regions are Beijing, Tianjin, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong and Guangdong and one interior region is
Heilongjiang. The follower group's two coastal regions are Hebei and Hainan and nineteen interior regions are Shanxi, Jilin, Anhui, Jiangxi, Henan, Hubei, Hunan,
Inner Mongolia, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang.

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Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

postgraduate scholarship and a research grant. We also acknowledge valuable comments and suggestions from anonymous referees of
the Journal and participants of a work-in-progress (WIP) seminar and conferences in Central University of Finance and Economics,
Southeast University and Tsinghua University.

Appendix A. Appendix

Table A1
Intangible capital stock in Chinese regions (2003–2014).

Regio- Year K1 K2 K3 K4 K5 K6 K7 K8 K9 K10

n
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

Beijin- 2003 897.86 1201.74 8.69 49.46 220.52 193.63 234.71 57.30 114.60 2978.51
g 2004 1221.50 1345.62 12.48 59.50 251.41 341.41 257.69 67.65 135.31 3692.58
2005 1817.53 1527.43 11.56 71.84 298.88 590.99 271.16 84.37 168.73 4842.48
2006 2296.87 1717.72 12.49 85.41 344.48 880.85 298.64 104.36 208.72 5949.55
2007 2882.74 1920.42 19.92 102.24 400.69 1194.84 337.10 122.31 244.62 7224.87
2008 3434.32 2111.26 22.92 124.24 461.00 1545.09 388.82 140.54 281.09 8509.28
2009 4206.86 2392.99 21.05 147.99 520.82 1902.68 393.07 161.53 323.07 10,070.06
2010 5149.64 2736.22 24.99 183.29 584.44 2759.40 453.66 179.24 358.47 12,429.35
2011 6179.41 3068.27 26.57 224.36 654.79 3684.60 642.79 193.03 386.06 15,059.88
2012 7433.81 3432.16 30.43 291.00 733.77 4979.55 805.10 211.71 423.43 18,340.96
2013 8766.43 3805.16 37.56 362.87 814.15 6529.13 1288.00 236.05 472.09 22,311.42
2014 10,241.54 4173.94 49.58 461.37 920.50 7891.74 1675.29 256.56 513.13 26,183.65
Tianji- 2003 70.04 146.18 61.89 94.52 43.31 102.37 40.47 25.25 50.51 634.55
n 2004 97.04 182.66 72.87 93.93 51.06 222.59 46.37 28.04 56.08 850.63
2005 175.22 227.32 73.26 92.09 58.48 257.57 53.31 31.07 62.13 1030.46
2006 218.77 288.82 83.01 91.26 66.62 304.38 61.43 34.06 68.12 1216.46
2007 209.23 357.46 97.49 91.44 81.87 364.89 70.34 37.16 74.33 1384.22
2008 240.20 442.28 117.47 89.35 98.08 404.74 79.06 41.85 83.71 1596.74
2009 323.76 540.25 133.43 91.34 121.84 464.98 89.34 51.94 103.88 1920.76
2010 436.10 661.76 153.28 94.52 149.06 529.67 98.22 60.50 121.00 2304.10
2011 593.51 812.16 128.93 100.24 183.92 608.12 109.03 66.60 133.20 2735.71
2012 907.18 991.49 120.78 102.71 232.62 672.66 123.21 74.05 148.11 3372.81
2013 1249.71 1200.85 118.80 106.53 289.14 877.56 149.84 83.84 167.68 4243.95
2014 1666.27 1407.80 123.11 111.77 354.52 1075.54 175.42 90.85 181.71 5186.99
Hebei 2003 16.28 141.49 18.35 94.53 109.13 296.45 10.19 42.90 85.80 815.12
2004 22.67 166.70 28.01 94.41 116.55 381.99 10.80 48.46 96.92 966.50
2005 35.11 202.42 47.74 96.01 117.74 350.60 10.16 53.18 106.36 1019.32
2006 40.65 250.89 93.22 98.12 124.86 323.71 10.16 59.11 118.22 1118.94
2007 55.51 299.99 150.05 99.09 134.94 317.50 12.09 64.45 128.89 1262.51
2008 71.57 352.60 178.22 100.69 146.88 319.58 12.82 73.10 146.20 1401.66
2009 86.55 424.29 190.06 103.56 167.42 313.73 13.64 83.16 166.33 1548.74
2010 180.00 494.88 184.04 104.89 189.34 342.87 12.17 99.66 199.32 1807.19
2011 229.41 582.32 197.56 107.03 213.66 385.32 11.56 115.37 230.74 2072.98
2012 270.95 695.98 204.15 113.62 247.94 439.51 11.45 128.57 257.13 2369.30
2013 305.09 823.60 225.93 125.94 286.43 497.54 11.67 140.80 281.60 2698.61
2014 342.06 964.02 267.37 141.06 347.39 542.54 11.94 152.00 303.99 3072.36
Shanxi 2003 2.63 70.86 3.95 78.72 41.43 29.30 4.56 25.04 50.08 306.56
2004 3.56 87.82 6.62 81.07 44.25 39.94 6.04 30.51 61.02 360.83
2005 5.27 103.82 15.18 82.91 50.84 50.33 12.11 37.41 74.82 432.69
2006 7.84 128.45 26.03 85.23 56.99 64.15 15.89 45.23 90.45 520.26
2007 10.71 160.51 31.77 88.41 62.51 76.98 18.41 52.66 105.32 607.26
2008 14.81 193.95 38.48 92.07 67.90 93.01 22.01 62.29 124.58 709.09
2009 20.23 243.92 48.40 94.58 90.07 112.06 23.76 71.36 142.71 847.08
2010 30.74 285.02 55.62 97.86 112.41 131.78 25.04 82.49 164.98 985.95
2011 41.97 332.93 63.03 103.08 133.19 160.39 27.60 94.61 189.23 1146.03
2012 56.10 391.46 70.77 112.52 160.98 220.79 33.36 105.05 210.09 1361.12
2013 63.43 465.77 88.44 122.33 194.05 273.25 32.72 112.29 224.57 1576.86
2014 63.79 528.62 120.50 135.66 238.05 512.79 37.76 114.81 229.62 1981.59

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Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

Inner- 2003 20.14 21.29 2.53 55.62 8.22 11.55 2.65 13.00 26.01 161.00
M- 2004 46.36 27.78 7.55 56.39 10.94 22.94 3.08 15.68 31.36 222.07
on- 2005 42.53 37.77 13.13 57.50 17.64 31.39 3.84 18.39 36.78 258.96
go- 2006 38.08 50.83 32.90 60.07 24.49 38.73 4.60 21.15 42.30 313.16
lia 2007 43.18 68.43 77.82 61.61 33.82 46.33 6.32 25.81 51.62 414.93
2008 47.00 89.38 161.52 61.17 42.40 51.48 7.56 31.95 63.91 556.36
2009 46.40 125.77 227.67 64.17 61.23 64.18 9.47 40.29 80.57 719.76
2010 51.19 164.33 257.91 65.56 80.18 76.94 10.50 49.59 99.18 855.39
2011 53.10 210.59 291.81 68.09 101.57 88.62 11.85 57.78 115.56 998.98
2012 58.99 263.47 295.79 74.76 123.57 104.34 13.51 65.24 130.48 1130.15
2013 65.31 323.06 376.09 80.28 147.42 117.15 21.80 77.41 154.82 1363.32
2014 71.10 378.54 613.75 87.98 182.04 129.27 27.73 87.20 174.40 1752.00
Liaon- 2003 180.29 400.13 20.72 92.49 68.96 30.30 35.67 60.76 121.52 1010.83
ing 2004 238.58 456.54 28.27 97.42 76.26 95.58 38.45 68.97 137.95 1238.03
2005 391.16 513.93 32.10 100.54 86.12 146.90 45.88 76.47 152.95 1546.05
2006 431.69 571.06 46.70 105.21 96.73 201.79 52.42 85.93 171.86 1763.39
2007 514.14 643.54 58.19 108.71 107.72 303.47 46.20 100.70 201.39 2084.06
2008 603.84 713.54 70.75 115.73 118.70 395.68 45.08 113.63 227.27 2404.23
2009 887.46 817.71 81.38 125.86 148.55 475.85 45.31 134.43 268.86 2985.41
2010 1368.87 941.64 97.21 136.46 176.40 571.56 48.74 162.04 324.08 3826.99
2011 2075.19 1092.30 105.17 143.50 204.50 669.50 48.91 189.30 378.59 4906.96
2012 3094.05 1230.72 111.84 151.52 243.27 769.64 51.02 207.30 414.60 6273.94
2013 4305.40 1388.67 124.15 161.70 287.30 858.35 72.83 223.49 446.97 7868.87
2014 5390.78 1507.56 143.30 175.41 351.45 916.16 85.64 221.68 443.35 9235.33
Jilin 2003 82.86 149.97 52.13 42.96 3.52 28.25 12.73 29.15 58.31 459.87
2004 101.70 163.89 58.98 47.74 5.57 32.10 13.76 32.53 65.07 521.35
2005 136.84 178.11 66.24 54.92 14.36 40.38 14.51 35.47 70.93 611.75
2006 174.08 190.14 79.75 61.42 22.57 50.29 15.92 39.18 78.36 711.71
2007 217.57 207.75 84.89 67.47 30.46 60.15 17.04 44.90 89.81 820.02
2008 241.57 221.32 95.68 78.59 38.19 71.41 18.21 51.91 103.82 920.71
2009 298.61 262.19 100.58 90.31 47.59 88.93 20.97 59.41 118.81 1087.42
2010 371.26 285.56 106.67 103.01 55.19 104.17 23.75 71.93 143.86 1265.39
2011 457.27 311.63 116.95 115.01 61.60 128.39 25.72 79.42 158.84 1454.82
2012 552.45 350.88 124.35 134.50 69.65 151.51 28.03 91.75 183.51 1686.63
2013 669.64 390.44 133.98 148.89 80.73 167.58 30.12 101.46 202.92 1925.74
2014 800.23 433.00 146.44 167.87 103.22 182.41 32.81 107.49 214.97 2188.42
Heilo- 2003 82.31 102.66 144.24 47.33 8.52 33.92 17.40 19.64 39.27 495.30
ng- 2004 93.14 121.36 146.79 49.76 11.29 38.56 18.15 22.45 44.91 546.41
jia- 2005 115.04 149.28 152.21 51.80 12.57 39.67 18.46 27.79 55.59 622.42
ng 2006 130.61 179.97 158.29 54.80 16.85 43.60 19.20 32.47 64.94 700.74
2007 143.31 212.65 154.05 58.03 26.18 48.18 19.51 37.90 75.80 775.62
2008 153.10 256.24 149.57 61.11 34.83 54.30 20.58 43.47 86.94 860.14
2009 169.03 321.96 153.79 67.52 49.81 66.29 21.56 52.59 105.19 1007.76
2010 189.01 380.61 159.05 73.47 65.80 143.24 26.65 59.45 118.90 1216.18
2011 209.73 423.67 160.87 80.82 81.87 204.64 30.46 64.91 129.83 1386.78
2012 237.31 475.51 173.74 87.14 106.35 202.41 33.89 75.58 151.15 1543.09
2013 265.73 538.14 189.80 94.07 132.58 223.65 37.93 85.80 171.61 1739.32
2014 298.57 587.27 208.72 102.75 167.95 187.95 42.20 94.23 188.46 1878.11
Shang- 2003 252.38 492.69 5.99 182.87 269.60 29.10 195.76 85.25 170.49 1684.14
hai 2004 345.45 586.31 8.42 197.56 301.79 151.49 223.14 97.10 194.21 2105.48
2005 645.43 696.59 8.58 213.10 314.41 288.14 259.12 109.71 219.42 2754.50
2006 822.17 835.93 9.57 232.10 335.47 458.02 270.47 122.15 244.29 3330.16
2007 1077.97 991.40 17.83 251.17 382.56 646.63 287.83 138.03 276.05 4069.47
2008 1246.91 1156.43 16.23 274.24 438.79 918.28 314.74 158.90 317.80 4842.32
2009 1491.18 1363.06 22.02 311.48 519.06 1200.71 322.82 192.82 385.65 5808.80
2010 1814.61 1572.15 32.81 364.16 590.90 1341.61 355.97 218.25 436.49 6726.95
2011 2430.52 1836.06 34.53 413.94 671.11 1613.67 391.79 235.66 471.33 8098.60
2012 3438.29 2140.79 38.03 480.69 755.02 2118.00 441.87 258.35 516.71 10,187.76
2013 4498.16 2477.91 48.07 555.79 854.42 2514.63 419.69 288.10 576.20 12,232.97
2014 5559.22 2823.51 68.19 649.17 982.30 2831.19 447.59 323.97 647.94 14,333.08
2003 174.97 608.28 7.89 161.59 239.10 107.85 90.41 98.85 197.70 1686.64

13
Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

Jian- 2004 281.90 760.39 14.65 174.61 275.07 242.89 103.59 119.59 239.18 2211.87
gsu 2005 615.91 927.19 20.23 187.63 285.85 331.03 103.37 137.95 275.91 2885.07
2006 1065.49 1143.72 25.82 202.84 308.12 394.47 126.20 157.82 315.63 3740.12
2007 1505.71 1394.76 23.10 220.30 367.13 466.69 134.58 188.33 376.67 4677.27
2008 2063.43 1728.97 32.29 240.63 434.63 558.92 149.78 235.90 471.79 5916.33
2009 2815.14 2131.99 39.07 267.71 501.09 677.08 171.19 272.40 544.80 7420.47
2010 3836.73 2563.54 83.83 303.27 590.47 794.44 160.46 325.81 651.62 9310.16
2011 5088.78 3048.48 87.70 345.34 691.55 986.23 206.57 377.33 754.66 11,586.63
2012 6850.08 3645.22 91.12 390.56 817.74 1221.51 249.26 438.78 877.56 14,581.81
2013 8975.85 4297.80 110.75 433.67 963.90 1784.87 370.84 504.26 1008.51 18,450.43
2014 11,332.80 4970.25 157.41 489.35 1165.30 2435.21 467.13 571.49 1142.98 22,731.91
Zheji- 2003 537.46 270.75 2.23 108.10 153.15 178.64 77.84 76.91 153.83 1558.91
an- 2004 648.04 355.68 2.58 121.20 182.30 234.93 88.08 91.81 183.61 1908.24
g 2005 739.97 477.03 2.76 136.80 224.58 276.05 99.77 107.51 215.02 2279.49
2006 832.73 638.38 3.20 154.53 271.34 333.33 112.18 125.60 251.19 2722.48
2007 871.84 820.97 4.01 174.24 328.40 372.41 124.11 147.26 294.51 3137.76
2008 964.82 1022.00 5.93 196.80 396.79 488.95 138.72 170.37 340.74 3725.11
2009 1139.32 1247.39 6.94 227.03 501.71 574.00 150.21 197.53 395.06 4439.18
2010 1401.83 1492.14 9.84 269.71 610.84 675.08 175.44 231.64 463.28 5329.80
2011 1732.51 1752.91 11.09 312.36 718.49 926.43 195.85 253.01 506.02 6408.66
2012 2363.55 2082.47 18.01 363.74 808.84 1190.38 223.22 279.86 559.73 7889.82
2013 3264.82 2430.18 27.02 431.02 896.73 1780.70 258.06 307.94 615.89 10,012.36
2014 4316.71 2802.82 39.33 518.48 953.03 3380.78 297.99 337.37 674.74 13,321.26
Anhui 2003 20.28 118.95 9.38 53.97 88.91 190.35 21.34 27.88 55.75 586.82
2004 26.70 142.54 12.42 58.67 89.29 223.10 23.46 32.87 65.73 674.77
2005 36.22 170.63 16.45 63.39 85.21 221.93 24.52 41.68 83.37 743.40
2006 52.54 208.55 19.28 68.03 83.11 234.22 26.71 49.59 99.17 841.19
2007 70.27 249.51 23.46 71.29 82.52 252.36 30.29 56.81 113.62 950.14
2008 86.26 305.71 27.32 79.41 83.81 281.14 33.57 65.66 131.31 1094.19
2009 104.18 390.28 31.11 89.77 101.75 309.97 42.29 80.86 161.72 1311.92
2010 121.05 475.94 37.78 97.72 117.07 346.95 51.99 96.81 193.62 1538.92
2011 135.11 577.54 44.30 107.21 135.24 402.29 60.45 105.62 211.24 1779.00
2012 156.51 719.49 50.41 119.13 158.99 491.79 69.17 116.42 232.84 2114.76
2013 191.73 893.47 59.69 133.55 186.97 608.90 77.74 126.80 253.60 2532.44
2014 254.51 1072.70 73.26 152.10 235.26 724.03 87.97 138.80 277.60 3016.22
Fujian 2003 85.65 142.75 1.65 55.24 118.23 17.20 28.47 30.58 61.16 540.93
2004 120.34 169.20 2.45 59.49 130.86 38.13 32.11 36.17 72.34 661.11
2005 235.81 198.43 3.59 63.55 125.55 60.01 37.05 40.48 80.97 845.45
2006 323.33 237.44 5.64 68.85 125.76 83.85 42.10 46.25 92.51 1025.73
2007 434.15 280.54 7.49 74.40 136.75 118.69 48.28 55.30 110.61 1266.22
2008 502.65 332.94 10.75 80.60 154.33 151.22 54.31 66.19 132.39 1485.38
2009 709.35 409.50 12.53 85.99 181.75 175.33 72.19 78.72 157.44 1882.79
2010 1046.83 498.50 13.65 92.34 214.50 211.46 86.11 96.79 193.59 2453.78
2011 1456.14 607.57 15.15 100.49 244.78 296.02 97.23 114.85 229.70 3161.93
2012 1915.53 739.75 18.40 112.64 281.39 417.74 110.19 130.52 261.04 3987.20
2013 2228.37 885.81 23.23 133.34 324.11 634.69 120.38 146.92 293.84 4790.69
2014 2901.11 1040.72 30.08 157.73 381.37 691.06 135.07 156.05 312.11 5805.30
Jiang- 2003 26.23 66.17 1.19 51.46 80.19 1.70 13.34 17.36 34.71 292.35
xi 2004 34.45 81.06 1.74 53.99 76.10 8.55 15.11 19.73 39.46 330.19
2005 49.35 100.68 3.06 57.28 69.53 23.72 17.09 21.63 43.26 385.59
2006 61.72 125.35 4.22 59.85 64.16 34.03 19.66 24.23 48.46 441.67
2007 75.56 154.75 6.21 62.82 59.94 42.98 21.45 27.97 55.95 507.63
2008 85.98 190.20 8.95 66.82 57.23 49.55 23.47 33.84 67.68 583.72
2009 95.37 234.35 12.79 71.73 61.88 63.99 24.81 39.17 78.34 682.44
2010 103.01 274.64 20.55 75.80 71.25 101.97 27.16 44.68 89.36 808.41
2011 114.05 307.61 27.77 80.80 86.24 142.66 29.28 48.69 97.38 934.48
2012 123.90 349.64 32.85 90.21 102.87 186.21 32.54 54.80 109.61 1082.63
2013 138.78 401.84 41.77 102.66 122.44 242.39 33.51 63.77 127.54 1274.70
2014 157.57 460.30 56.37 118.00 158.33 296.68 36.71 76.44 152.88 1513.28
Shand- 2003 473.01 378.11 40.73 154.60 266.19 51.15 58.81 87.21 174.42 1684.23
2004 572.73 476.82 63.53 161.31 283.77 77.16 62.68 105.47 210.95 2014.43

14
Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

on- 2005 655.67 606.60 82.44 166.65 280.42 122.41 66.55 118.55 237.10 2336.39
g 2006 671.91 745.12 98.91 171.21 284.81 178.04 74.03 133.51 267.02 2624.57
2007 749.31 932.39 88.15 175.64 309.42 227.01 73.74 156.22 312.45 3024.32
2008 864.55 1181.78 112.09 183.03 339.84 294.46 77.57 198.73 397.47 3649.52
2009 1161.88 1480.09 134.92 193.17 368.68 392.82 78.01 230.38 460.75 4500.69
2010 1642.64 1856.07 156.14 203.69 417.52 498.98 83.27 303.95 607.89 5770.14
2011 2317.43 2293.44 182.07 219.63 475.44 634.70 100.55 330.54 661.08 7214.87
2012 3089.01 2807.47 210.19 239.96 546.51 796.92 115.31 372.48 744.97 8922.81
2013 4099.63 3358.47 259.53 269.01 630.18 975.89 164.82 411.71 823.42 10,992.65
2014 5527.73 3933.27 339.31 304.43 683.11 1159.77 198.54 439.93 879.86 13,465.94
Henan 2003 5.35 131.67 38.50 122.72 61.57 13.35 23.06 45.38 90.76 532.35
2004 9.57 159.94 50.77 123.12 67.60 23.13 25.26 50.57 101.13 611.09
2005 26.06 194.07 56.15 123.06 75.48 60.72 25.77 55.78 111.56 728.65
2006 54.29 248.31 57.10 126.06 84.58 94.87 26.07 60.74 121.47 873.48
2007 98.73 309.87 51.67 126.37 97.58 135.55 25.96 67.02 134.03 1046.78
2008 143.37 373.50 61.83 127.80 110.00 188.68 26.40 74.04 148.07 1253.70
2009 188.01 482.95 84.83 130.47 135.43 227.28 32.34 85.20 170.40 1536.92
2010 233.03 597.52 105.11 133.35 171.16 283.92 32.83 97.31 194.62 1848.85
2011 275.52 731.80 127.82 138.55 211.92 314.15 33.40 113.19 226.38 2172.72
2012 329.35 884.28 162.14 147.57 257.28 354.79 35.05 129.64 259.28 2559.38
2013 398.80 1049.86 212.65 161.34 308.35 486.92 70.52 142.70 285.40 3116.54
2014 483.01 1226.55 285.06 177.20 378.02 599.71 89.00 162.03 324.06 3724.63
Hubei 2003 62.33 204.60 3.99 127.04 146.76 41.59 19.15 36.49 72.98 714.93
2004 100.57 238.37 7.66 132.11 160.22 122.34 21.17 42.00 83.99 908.42
2005 124.78 285.44 11.13 137.04 144.11 196.34 26.24 49.45 98.89 1073.41
2006 136.43 345.25 14.89 143.10 135.75 275.66 26.17 56.44 112.87 1246.56
2007 162.66 405.09 13.59 149.61 143.74 363.32 28.73 67.98 135.95 1470.68
2008 218.14 485.23 21.05 156.77 153.26 450.05 32.87 77.96 155.93 1751.26
2009 287.13 617.24 27.09 169.79 168.90 574.00 34.43 98.15 196.31 2173.05
2010 357.33 757.91 35.47 185.16 185.66 710.39 28.97 128.80 257.61 2647.30
2011 414.56 905.30 44.75 197.56 204.74 859.01 43.16 145.71 291.43 3106.22
2012 607.41 1073.60 47.87 216.51 234.97 1020.25 55.20 162.41 324.82 3743.05
2013 1042.32 1259.46 57.73 231.89 274.77 1372.08 70.04 183.58 367.16 4859.03
2014 1460.60 1463.09 77.63 251.59 330.00 1512.64 86.04 203.74 407.47 5792.81
Hunan 2003 60.41 112.36 4.83 120.24 105.11 37.17 7.52 38.46 76.92 563.02
2004 73.82 138.64 6.29 126.52 107.49 73.65 11.35 43.72 87.44 668.92
2005 120.40 167.14 7.02 135.29 101.41 94.16 18.56 46.54 93.07 783.57
2006 152.46 199.24 9.59 143.43 102.45 106.15 27.46 49.66 99.31 889.76
2007 175.83 243.60 11.52 151.74 103.78 123.02 32.07 56.71 113.42 1011.67
2008 213.14 314.93 14.45 158.94 106.58 152.32 65.49 66.93 133.87 1226.65
2009 284.76 416.43 16.39 171.07 124.10 195.50 30.68 83.71 167.42 1490.07
2010 352.81 519.71 18.24 185.15 140.98 243.59 51.81 113.95 227.91 1854.13
2011 433.42 630.26 21.68 203.81 154.28 296.62 80.16 149.57 299.14 2268.94
2012 504.71 765.57 26.66 227.73 170.84 340.55 185.70 176.71 353.43 2751.91
2013 565.25 906.79 33.40 255.78 193.95 395.04 152.70 202.77 405.54 3111.23
2014 645.47 1055.57 42.47 290.04 231.90 451.02 263.94 197.41 394.82 3572.65
Guan- 2003 783.74 657.59 36.70 283.42 112.57 272.64 212.86 121.68 243.37 2724.58
gd- 2004 926.41 777.45 45.61 292.86 146.94 346.66 231.70 144.60 289.20 3201.42
on- 2005 1079.22 898.88 55.31 300.77 193.30 461.30 251.95 172.50 345.00 3758.23
g 2006 1357.00 1065.48 66.99 310.94 252.12 621.70 263.24 204.23 408.46 4550.17
2007 1664.09 1282.43 76.20 319.80 373.83 806.05 269.54 241.84 483.69 5517.47
2008 1983.89 1535.61 96.84 332.14 492.34 992.22 286.76 286.61 573.22 6579.64
2009 2625.49 1905.52 143.96 352.54 607.03 1179.74 281.11 328.17 656.33 8079.88
2010 3316.30 2333.17 171.25 377.76 725.00 1474.24 263.98 372.73 745.46 9779.89
2011 4480.94 2861.02 142.30 404.72 829.72 1993.87 318.50 412.53 825.06 12,268.67
2012 5918.57 3474.59 118.93 432.09 937.68 2595.45 365.43 456.50 913.01 15,212.25
2013 7333.33 4151.97 100.86 460.57 1076.87 3278.59 362.58 508.97 1017.95 18,291.69
2014 9119.97 4836.98 87.13 496.58 1239.44 4429.71 388.59 572.74 1145.48 22,316.60
Guan- 2003 6.90 40.36 7.05 62.86 24.97 7.90 12.49 23.66 47.31 233.50
gxi 2004 10.17 47.53 8.04 67.40 28.81 15.09 12.21 25.48 50.96 265.68
2005 17.73 56.30 8.97 71.56 34.30 23.13 12.58 26.52 53.05 304.14

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Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

2006 26.21 66.82 10.36 75.28 39.88 29.76 14.41 28.53 57.07 348.32
2007 40.00 78.10 11.77 80.85 47.05 37.75 12.05 32.35 64.70 404.64
2008 52.36 96.88 13.67 89.31 54.75 47.23 10.67 35.09 70.18 470.15
2009 74.42 128.48 15.52 99.32 76.55 60.93 7.95 40.82 81.65 585.65
2010 75.70 165.66 19.38 105.06 95.86 75.53 6.50 64.63 129.26 737.57
2011 91.28 206.81 22.49 110.04 113.45 88.70 5.80 77.08 154.16 869.80
2012 116.47 254.57 26.31 119.38 138.08 103.15 5.42 92.04 184.08 1039.50
2013 148.49 301.85 31.18 131.73 168.50 119.62 14.96 97.67 195.35 1209.35
2014 169.01 343.57 37.35 146.44 206.78 135.98 18.53 102.14 204.28 1364.07
Haina- 2003 2.84 6.31 0.02 27.56 29.18 31.34 2.66 7.67 15.34 122.92
n 2004 3.37 7.65 0.10 28.85 28.62 32.70 3.00 8.32 16.65 129.26
2005 3.92 8.08 0.17 29.34 24.40 29.91 3.47 9.82 19.64 128.76
2006 3.83 8.98 0.27 29.84 21.08 28.73 3.55 9.69 19.38 125.34
2007 4.68 10.18 2.38 31.29 19.19 29.77 3.60 9.46 18.92 129.47
2008 6.78 11.69 4.35 33.15 17.90 30.75 4.02 10.16 20.33 139.12
2009 6.68 15.57 6.02 34.53 20.69 32.88 4.75 11.67 23.33 156.12
2010 8.19 19.48 12.52 35.74 23.58 37.89 5.19 13.42 26.84 182.85
2011 11.02 25.09 16.48 36.86 27.55 43.09 7.83 14.07 28.14 210.13
2012 21.95 32.20 21.35 37.63 32.44 48.77 10.10 15.12 30.23 249.79
2013 29.19 38.71 41.81 38.84 37.86 54.91 10.13 16.38 32.75 300.58
2014 35.16 45.50 108.07 40.48 46.59 61.26 11.52 18.74 37.48 404.79
Chon- 2003 66.22 76.72 1.61 52.96 42.52 122.63 25.55 19.20 38.41 445.83
gq- 2004 81.75 92.43 10.28 56.50 46.72 131.47 26.64 22.75 45.50 514.03
ing 2005 118.44 110.34 21.03 58.96 47.85 149.57 28.91 27.79 55.59 618.49
2006 146.76 130.21 25.07 62.31 49.72 175.14 30.07 31.92 63.84 715.04
2007 171.90 155.86 23.87 65.51 51.91 206.01 30.66 38.55 77.09 821.37
2008 186.20 185.85 22.66 71.00 59.95 227.79 31.04 44.85 89.69 919.03
2009 207.11 231.04 22.71 76.23 84.35 264.77 32.98 48.66 97.33 1065.17
2010 270.79 285.10 19.44 84.14 112.19 311.37 29.23 55.27 110.55 1278.07
2011 414.48 346.36 23.78 91.72 148.21 364.26 31.04 60.97 121.94 1602.75
2012 663.07 423.80 23.09 97.82 194.25 420.99 32.50 66.50 133.00 2055.02
2013 937.37 501.46 37.92 102.62 243.91 477.38 42.00 76.31 152.62 2571.59
2014 1273.83 585.80 122.58 109.13 296.03 557.00 47.03 93.17 186.34 3270.91
Sichu- 2003 55.20 328.55 12.43 191.60 133.36 23.90 19.19 51.84 103.68 919.75
an 2004 80.35 361.01 28.00 189.29 140.85 146.08 21.63 60.19 120.38 1147.79
2005 127.99 407.03 49.77 188.95 144.46 198.31 28.87 64.38 128.76 1338.52
2006 197.82 452.94 73.77 188.49 148.98 255.30 35.02 69.97 139.95 1562.24
2007 385.15 517.11 265.53 188.23 155.12 315.51 43.07 81.18 162.36 2113.25
2008 612.49 579.53 301.12 186.97 166.88 367.29 49.45 96.06 192.13 2551.91
2009 839.40 689.90 314.93 189.74 183.34 446.28 54.53 112.04 224.09 3054.25
2010 1156.91 816.19 342.08 193.06 205.62 554.33 61.25 137.52 275.05 3742.02
2011 1710.02 929.38 364.63 198.97 237.96 674.96 67.30 152.71 305.42 4641.35
2012 2324.40 1070.42 388.79 213.59 299.70 769.27 75.23 164.00 328.01 5633.42
2013 2988.40 1227.15 484.20 232.85 371.76 853.74 89.91 175.27 350.54 6773.82
2014 3693.65 1399.74 698.87 257.49 450.52 1476.97 103.97 184.45 368.91 8634.57
Guizh- 2003 1.37 35.63 4.48 19.91 20.38 19.96 0.33 17.19 34.39 153.64
ou 2004 3.16 40.17 6.13 22.09 23.24 23.93 0.78 18.96 37.92 176.39
2005 15.29 46.12 8.23 24.33 27.51 29.33 5.47 20.72 41.44 218.43
2006 17.35 54.68 10.93 27.68 31.64 35.53 7.27 21.66 43.32 250.06
2007 24.33 59.42 13.88 30.88 36.58 40.25 7.77 23.66 47.33 284.09
2008 28.46 67.00 15.96 35.27 41.41 46.37 12.45 26.84 53.67 327.43
2009 42.43 81.15 20.13 39.95 51.38 55.09 10.02 31.43 62.85 394.41
2010 64.46 94.88 26.10 49.76 61.95 85.05 8.91 36.19 72.38 499.68
2011 91.44 109.61 33.85 58.40 74.40 115.60 9.06 40.73 81.47 614.55
2012 118.11 124.29 40.89 67.51 88.41 147.86 14.63 46.80 93.59 742.08
2013 144.63 138.88 51.31 75.83 103.36 184.50 8.43 54.48 108.95 870.37
2014 178.07 155.96 66.44 87.83 118.48 224.87 8.55 61.08 122.15 1023.43
Yunn- 2003 38.26 40.15 18.48 56.74 39.52 8.68 12.32 22.12 44.24 280.51
an 2004 46.82 47.56 25.61 59.32 43.63 25.79 13.19 25.24 50.47 337.63
2005 61.48 63.57 37.49 61.76 50.50 41.82 14.55 27.93 55.86 414.96
2006 64.07 75.11 66.04 66.43 56.18 57.92 16.58 30.90 61.81 495.05

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Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

2007 64.36 88.23 57.78 69.81 61.51 73.10 17.16 34.08 68.16 534.20
2008 68.21 101.82 56.77 72.40 68.97 88.00 18.23 39.71 79.43 593.52
2009 72.27 120.28 59.32 76.74 88.20 111.30 19.90 45.48 90.95 684.44
2010 90.32 140.39 67.17 83.26 104.33 157.05 20.68 53.02 106.04 822.26
2011 105.16 164.11 72.71 90.83 121.40 190.48 25.07 68.81 137.62 976.18
2012 121.87 193.16 78.63 101.27 140.96 220.88 28.59 71.03 142.06 1098.46
2013 133.07 224.71 90.01 109.41 167.68 254.03 31.33 75.65 151.30 1237.20
2014 132.45 255.16 108.70 119.70 202.16 290.71 34.70 78.88 157.77 1380.23
Tibet 2003 0.00 0.83 1.30 4.60 3.63 5.03 0.53 0.18 0.37 16.48
2004 0.00 1.08 1.97 5.15 4.76 6.35 1.40 1.37 2.75 24.83
2005 0.00 1.26 2.75 5.81 4.56 6.31 1.76 1.93 3.86 28.24
2006 0.00 1.54 3.56 6.63 4.09 5.88 1.95 2.41 4.83 30.90
2007 0.00 1.98 4.23 7.59 3.87 5.38 2.06 2.40 4.79 32.31
2008 0.00 2.83 7.67 8.39 3.78 4.90 3.62 2.75 5.51 39.45
2009 0.00 3.74 9.96 9.38 5.16 4.77 2.37 3.17 6.35 44.91
2010 0.00 4.45 16.38 10.35 6.57 4.47 1.99 3.81 7.62 55.64
2011 0.00 4.65 21.59 11.70 7.95 4.04 2.08 4.23 8.45 64.69
2012 0.00 5.35 25.61 12.79 8.99 3.33 3.68 4.81 9.62 74.18
2013 0.00 6.30 32.17 14.63 10.60 2.68 2.94 5.73 11.45 86.50
2014 0.00 7.07 42.41 16.80 12.79 2.16 4.47 6.58 13.17 105.45
Shaan- 2003 17.47 416.62 100.31 65.90 12.18 97.26 17.89 30.06 60.12 817.81
xi 2004 37.98 450.40 100.28 70.04 15.81 163.31 13.00 33.83 67.67 952.32
2005 214.83 479.35 101.90 73.29 25.01 200.44 7.88 35.64 71.28 1209.63
2006 281.21 506.75 105.89 75.88 33.19 234.19 5.67 37.39 74.79 1354.95
2007 292.66 546.63 106.92 81.14 44.88 286.25 4.77 44.64 89.27 1497.16
2008 334.44 589.62 113.41 86.96 55.88 343.03 3.99 49.49 98.97 1675.79
2009 411.45 676.60 156.80 97.01 77.44 407.77 10.34 61.06 122.11 2020.57
2010 525.24 758.79 221.83 105.57 96.59 488.24 14.83 76.17 152.34 2439.59
2011 674.04 836.82 243.67 109.11 113.12 552.93 17.59 88.39 176.78 2812.47
2012 881.21 928.03 300.69 123.42 135.17 615.91 17.07 98.31 196.61 3296.42
2013 1183.62 1047.93 376.24 139.73 162.29 687.37 15.71 105.18 210.37 3928.45
2014 1548.50 1166.88 477.71 161.63 206.36 761.51 13.96 111.36 222.72 4670.63
Gansu 2003 3.80 54.16 27.97 30.00 54.16 20.78 5.25 19.58 39.17 254.87
2004 5.29 61.81 38.98 32.04 52.00 27.02 5.10 22.60 45.20 290.04
2005 11.41 74.03 47.52 34.67 47.15 42.47 4.20 23.88 47.77 333.10
2006 16.71 87.66 55.61 37.33 43.39 59.59 4.24 25.78 51.55 381.85
2007 23.89 99.02 61.97 39.90 40.93 65.86 4.12 28.42 56.85 420.95
2008 30.46 112.77 73.75 42.36 39.63 71.73 4.10 30.44 60.88 466.11
2009 36.41 130.76 88.83 46.33 40.35 82.40 4.90 33.84 67.67 531.49
2010 42.64 146.54 91.01 49.18 41.33 90.31 5.90 36.06 72.12 575.10
2011 47.84 162.05 111.73 51.94 45.13 101.43 7.37 36.32 72.63 636.43
2012 51.16 185.50 126.36 60.59 51.44 113.75 8.28 39.78 79.57 716.44
2013 57.10 209.53 151.42 66.77 60.41 132.85 4.74 42.35 84.69 809.85
2014 63.47 238.42 191.02 75.04 78.57 144.39 3.42 44.82 89.65 928.80
Qingh- 2003 0.00 18.24 32.80 5.35 12.01 3.91 1.14 4.36 8.71 86.51
ai 2004 0.00 18.82 35.89 5.96 12.16 4.71 1.33 4.52 9.04 92.43
2005 0.00 19.02 37.83 6.77 12.43 6.13 1.33 4.65 9.31 97.48
2006 0.00 19.47 42.87 7.80 12.67 7.23 1.66 5.04 10.08 106.83
2007 0.00 20.06 49.08 9.05 12.88 8.99 2.08 5.83 11.66 119.62
2008 0.00 20.13 55.08 10.03 13.17 12.15 2.41 6.19 12.39 131.54
2009 0.00 24.33 59.24 12.57 14.99 14.29 2.55 7.72 15.45 151.14
2010 0.00 29.41 68.88 12.81 16.90 15.97 2.70 9.19 18.39 174.24
2011 0.00 35.06 89.83 13.82 18.69 18.51 3.25 10.44 20.87 210.46
2012 0.00 39.97 117.81 15.38 21.80 21.01 3.86 9.99 19.98 249.80
2013 0.00 44.34 151.92 18.75 25.07 24.42 3.99 10.28 20.55 299.31
2014 0.00 48.41 195.20 23.21 34.31 27.91 4.51 10.90 21.80 366.25
Ningx- 2003 5.14 12.61 0.28 7.52 7.30 23.34 1.37 4.77 9.55 71.88
ia 2004 5.12 14.85 1.37 8.26 8.58 27.94 1.53 5.77 11.54 84.96
2005 5.25 16.69 3.46 9.21 11.68 25.78 2.29 6.45 12.91 93.72
2006 4.70 20.54 7.32 10.42 14.24 25.31 2.61 6.85 13.70 105.70
2007 4.62 26.04 9.33 11.23 16.93 24.87 2.84 7.22 14.45 117.53

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Q. Li, Y. Wu China Economic Review xxx (xxxx) xxx–xxx

2008 4.46 29.17 13.21 12.36 19.24 25.36 3.18 9.12 18.23 134.33
2009 4.82 34.82 17.23 14.10 22.87 25.74 2.29 10.34 20.68 152.91
2010 7.61 39.37 21.69 16.30 27.11 28.50 2.59 11.59 23.17 177.93
2011 10.01 45.30 28.07 18.84 32.57 31.63 2.84 13.70 27.41 210.37
2012 12.58 52.68 26.18 25.02 39.66 36.02 3.31 15.95 31.90 243.30
2013 15.70 60.95 33.60 28.57 47.91 41.34 3.12 17.74 35.48 284.40
2014 19.12 70.47 70.54 34.11 57.18 40.61 3.42 19.09 38.19 352.73
Xinjia- 2003 13.61 16.79 339.94 38.77 31.50 12.85 13.33 18.70 37.40 522.88
ng 2004 18.59 21.51 368.26 40.97 35.05 18.73 13.55 20.87 41.74 579.26
2005 22.33 25.30 377.62 42.70 38.09 28.63 13.02 22.75 45.49 615.92
2006 21.93 30.40 423.69 44.95 41.72 36.62 13.79 21.47 42.95 677.54
2007 23.22 35.97 429.76 47.53 48.99 46.03 14.49 24.24 48.49 718.72
2008 31.04 46.19 464.02 49.73 55.56 56.48 14.80 24.95 49.90 792.67
2009 37.56 62.01 518.22 56.79 65.03 71.47 12.21 31.74 63.48 918.51
2010 44.86 76.26 598.41 58.49 72.30 88.53 11.09 35.47 70.94 1056.37
2011 57.20 91.42 653.92 61.78 81.79 109.10 11.90 38.63 77.27 1183.01
2012 71.05 109.23 708.25 69.31 94.91 140.24 12.54 43.46 86.91 1335.88
2013 93.47 128.13 777.99 78.16 109.84 173.90 17.70 49.11 98.23 1526.52
2014 108.48 146.63 867.45 89.13 131.27 226.84 20.47 55.45 110.89 1756.61
Natio- 2003 2979.36 7109.22 1141.03 2601.58 2211.48 2582.26 1252.01 1220.87 2441.74 23,539.54
nal 2004 4150.85 8325.82 1327.85 2764.95 2518.01 3907.47 1378.47 1432.46 2864.93 28,670.81
2005 6954.84 9823.91 1505.66 2934.43 2792.36 5045.02 1525.06 1614.46 3228.91 35,424.64
2006 9221.06 11,591.31 1812.99 3115.55 3184.94 6344.12 1675.40 1830.20 3660.39 42,435.96
2007 11,744.05 13,549.35 2167.27 3329.68 3827.56 7774.79 1798.25 2141.87 4283.74 50,616.55
2008 14,386.72 15,773.39 2512.01 3581.47 4492.04 9409.51 1968.61 2540.99 5081.97 59,746.69
2009 18,582.91 18,825.12 2878.57 3918.71 5304.85 11,192.82 2028.35 2986.47 5972.94 71,690.74
2010 24,229.13 22,122.67 3309.61 4298.32 6132.81 13,727.64 2190.12 3628.32 7256.64 86,895.26
2011 31,817.54 25,732.45 3572.57 4681.68 6984.39 16,954.30 2656.37 4137.91 8275.82 104,813.00
2012 42,015.14 29,883.73 3855.13 5194.70 7921.89 20,863.15 3090.77 4702.34 9404.67 126,931.50
2013 53,768.71 34,370.28 4235.19 5756.79 9003.99 26,145.43 3951.38 5226.54 10,453.08 152,911.40
2014 67,369.63 38,898.17 4735.42 6323.45 10,876.24 32,808.98 4689.77 5666.52 11,333.04 182,701.20
Source: authors' own estimates.
Note: numbers in Columns (2)–(11) are in 10 thousand RMB. K1 “computer software”, K2 “scientific R & D”, K3 “E & E”, K4 “entertainment and artistic originals”, K5
“financial products and services”, K6 “architectural and engineering design”, K7 “advertising”, K8 “employer-provided training”, K9 “organizational structure”, K10
“total amount”.

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