The Effect of Regulation on Enterprises Economic Growth: Analysis of China (2012)

Abstract

China has been in a transition process towards a market-driven economy since the adoption of reform and open policy in 1979. Despite the imperfect regulation and market economy system, enterprises in China have experienced rapid growth over recent decades.This study focuses on the impacts of government regulation on economic development of enterprises in the transitional economy of China. This paper uses sales growth as economic performance outcome and uses time spent in dealing with requirements imposed by regulation as a measure of regulatory intensity for each company among Chinese enterprises. With 2012 China Enterprise Surveys, I analyze the effects of regulation and other related factors on economic development of enterprises. The results show that there is a statistically significant positive relationship between regulation and short-run economic performance of Chinese enterprises. However, excessive regulation constrains the development of businesses in Chinese economy. This paper is of great significance in explaining the non-linear relationship between government regulation and economic development. However, future study should circumvent potential endogeneity problems and monitor the impacts over a long period.