Technical Efficiency, Technological Change and Total Factor Productivity Growth in Chinese State-Owned Enterprises in the Early 1990s

Based on a framework proposed by Battese and Coelli (1995), we estimated the stochastic frontier production function for four Chinese industries: building materials, chemicals, machinery and textiles during 1990–1994. The type of technological change is tested and total factor productivity (TFP) growth is calculated for each industry. We found no evidence of technological change in the building materials, chemicals and textiles industries and a neutral technological progress in the machinery industry. There was significant reduction of technical efficiency in the chemicals, machinery and textiles industries. As the result, chemicals and textiles experienced a negative TFP growth, whereas building materials and machinery display negligible TFP change. Our result cast doubt on the industrial reform measures in China.