Source: Peterson Institute for International Economics

Zhu Rongji, China's premier in the period 1993-2003, was a bold reformer and a year before he took office, Deng Xiaoping, the supreme leader, had embarked on the famous 'southern tour' when he urged party leaders to  relaunch and expand reforms that had faltered following the crushing of student protests in Beijing in 1989. Tens of thousands of state-owned companies were closed down and 30m lost their jobs. By 1997, the urban private sector employed 24m and a decade later that number had risen to almost 80m. In recent years, among significant countries, France's public employment as a ratio of the workforce is the highest and is 2.6 times China's level.

While France has problems such as an annual budget deficit every year since 1975; a trade deficit every year since 2002; a public debt at 90% of GDP (annual output), and the government accounts for about 56% of GDP, UK investment levels are significantly below those of other EU countries including France. In 2008, the UK’s share of total GDP devoted to R&D stood at 1.8%, was a lower proportion than in the US (2.8%), Germany (2.7%) or France (2.1%). In spite of the evidence that low investment in skills, infrastructure and innovation imposes major constraints on growth, poor policies persist along with institutions that fail to provide long-term frameworks for investment and action. The result is that although there were improvements before the crisis, UK productivity levels still lag behind other major countries. In 2011 , UK GDP per hour was 27% below the level in the US, 25% behind France and 22% behind Germany.

Ryan Rutkowski of the Peterson Institute for International Economics said last month that state employment in China is a large apparatus including schools and hospitals, communist party organs, social organizations, government agencies and organizations, state-owned enterprises, and corporatized companies majority owned by state-owned groups (state-controlled enterprises). China’s labour statistical yearbook provided by the Ministry of Labor and Social Security showed the sum of all employees in all these groups to be 77.6m people in 2009. To put this number in context, the number Chinese workers employed by the state is close to the size of Turkey’s entire population and larger than the populations of many countries, including Thailand, France, and the United Kingdom. 

Rutkowski says that since 1999, China’s state employment has fallen from 13.6% of total urban and rural employment to 10.2% of total employment in 2009. "The key explanation for this decline is the continued consolidation of the state-owned enterprise sector since the late 1990s. State-owned enterprises and state-controlled enterprise employment fell by 37% between 1999 and 2009. In contrast to the prevailing view of rising state influence in the Hu and Wen administration, the number of state employees continued to fall during most of their administration, down 25% between 2002 and 2009."

The economist says:

"Countries with higher per capita incomes tend to have larger state sector employment as a result of higher expenditures on social services via hospitals and schools. For example, India has a slightly smaller state sector than China reflective of a smaller per capita income, while a more developed Malaysia has a comparatively larger state sector. The outlier in this analysis however is Japan, which shows a comparably smaller state sector for its level of development, suggesting an economy need not follow the path of the US, France, or Germany."

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