EDITED BY

　　YASHENG HUANG ，TONY SAICH，AND EDWARD STEINFELD

　　Harvard University Asia Center 2005

　　Cambridge ，Massachusetts

　　2005by the President and Fellows of Harvard College

　　Printed in the United States of America

　　The Harvard University Asia Center publishes a monograph series and ，in coordinationwith the Fairbank Center for East Asian Research，the Korea Institute ，the ReischauerInstitute of Japanese Studies ，and other faculties and institutes，administersresearch projects designed to further scholarly understanding of China，Japan ，Vietnam ，Korea ，and other Asian countries.The Center also sponsors projects addressingmultidisciplinary and regional issues in Asia.

　　Contents

　　1Introduction 1

　　Yasheng Huang ，Tony Saich，and Edward Steinfeld

　　2Reconstructing the Micro-Foundation of China＊s Financial Sector 19

　　Xinghai Fang

　　3The Impact of China ＊s Post-1993Financial Reform on State-Owned Enterprises：The Case of Shanghai 29

　　Le-yin Zhang

　　4China ＊s Program of Debt-Equity Swaps：Government Failure or Market Failure？

　　50

　　Edward Steinfeld

　　5China ＊s Rural Enterprises in Crisis ：The Role of Inadequate Financial Intermediation67

　　Wing Thye Woo

　　6Managing China＊s Transition Debt ：Challenges for Sustained Development 92

　　Pierre Bottelier

　　7Interest Rate Liberalization in China and the Implications for Non-State Banking111

　　Ligang Song

　　8Why More May Actually Be Less ：Financing Bias and Labor-Intensive FDI inChina 131

　　Yasheng Huang

　　9China ＊s Rural Health System in Transition ：Toward Coherent InstitutionalArrangements？158

　　Gerald Bloom

　　10Financial Reform ，Poverty ，and the Impact on Reproductive Health Provision：Evidence from Three Rural Townships 178

　　Tony Saich and Joan Kaufman

　　11Are China＊s Financial Reforms Leaving the Poor Behind ？204

　　Loren Brandt，Albert Park ，and Sangui Wang

　　12China＊s Pension System Reform and Capital Market Development 231

　　Xin Wang

　　Preface and Acknowledgments

　　The chapters in this book first saw the light of day as papers for the conferenceFinancial Sector Reform in China，held at the John F.Kennedy School of Government，Harvard University，from September 11to 13，2001.They have been through a numberof itera-tions since and we are grateful to the comments of the participants atthe conference and for readers on behalf of the press who have helped us improvetheir quality.

　　The conference was the first in a series of Asia Public Policy workshops organ-izedby the Asia Programs at the Center for Business and Government either solely orin collaboration with others.The second workshop looked at financial reform inAsia more broadly ，drawing lessons from the process of recovery after the AsianFinancial Crisis.The third of the workshops shifted away from looking at financialsector issues to social developments and more specifically at the question of HIV/AIDsin China.This edited volume is also the first publication of the Asia Public Policyseries under the auspices of Harvard University ＊s Asia Center.We hope that itwill be the first of many looking at public policy challenges in the Asia region.

　　Asia Programs at the Center for Business and Government encompasses severalprograms，projects，and executive education initiatives focusing on China ，Taiwan，Viet-nam，Indonesia ，Hong Kong and Japan.The mission is to support the trainingof officials in the region in an effort to enhance their capacity to manage policyin rapidly changing domestic and international public environments；engage in capacitybuilding in region to further the teaching and analysis of public administrationand public policy issues；and promote superior research and policy dialogues oncurrent developments in region and those issues central to relations with the UnitedStates.In terms of training，we have run a number of specific executive programsfor officials from the region at the Kennedy School ，including those for Chineselocal government officials and senior officers from the People＊s Liberation Army.In terms of capacity building ，the program oversees the Fulbright Economics TrainingProgram in Ho Chi Minh City ，Vietnam ，and works closely with the School of PublicPolicy at Tsinghua University ，China ，to help it develop its new degree programin public administration.The research program has comprised projects in Indonesialooking at microfinance lending ，economic development in Vietnam ，

　　PREFACE AND ACKNOWLEDGMENTS viii

　　financial sector reform in Asia ，private sector development in China ，andthe changing patterns for public goods＊provision throughout the region.

　　For the support of the original conference and the publication of this book ，we would like to thank State Street ，especially Bob Williams ；Dow Jones &Co.，Inc.；the Folger Fund and Lee Folger；and the Harvard University Asia Center.Withouttheir fi-nancial support，we would not have been able to put such an interestingconference to-gether.We would also like to thank both the former director of theCenter for Business and Government，Ira Jackson ，for his enthusiastic support forall our programs，and Dow Davis ，the executive director.For the conference，thesupport of Edward Cunningham and Sarah Cao was indispensable.This edited volumewould not have seen the light of day without the help of Melanie Strauss，who hasbeen a tower of strength in organizing us down the final stretch.Finally ，we wouldlike to thank William Kirby ，now dean of the Faculty of Arts and Sciences，who ，while Asia Center director，was very encouraging about setting up a new publicationseries.

　　Tony Saich

　　Contributors

　　Gerald Bloom，leader of the Health and Social Change Team at the Institute ofDevel-opment Studies in the United Kingdom，has published articles and co-editeda book on health system transition in China.His research focuses on health systemdevelopment in low and middle-income countries.

　　Pieter Bottelier，an economist and China scholar，was an Adjunct Lecturer atHarvard University＊s Kennedy School of Government（2001-3）and is currently anAdjunct Pro-fessor at Johns Hopkins University＊s School of Advanced InternationalStudies （1999－present ）。Bottelier was also chief of the World Bank＊s Missionin China（199－97）and Senior Advisor to the Bank＊s Vice President for East Asia（1997－98）。

　　Loren Brandt is a Professor of Economics at the University of Toronto specializingin the Chinese economy.His most recent research focuses on the dynamics of China＊s eco-nomic growth；enterprise privatization and property rights＊reform；andthe ongoing re-form of China＊s financial sector.He is also the author of Commercializationand Agricul-tural Development in China（Cambridge ，1990），and one of the areaeditors of Oxford University Press five-volume Encyclopedia of Economic History（2003）。

　　Mr.Xinghai Fang is currently Deputy Chief Executive Officer of Shanghai StockEx-change.From 1993to 1998，he worked for the World Bank Group as Economist/Invest-mentOfficer.In 1998，he joined the China Construction Bank ＊s Office of Group Coordi-nation，where he served as director.Then from 2000to 2001，he was Secretary General ofthe Management Committee at China Galaxy Securities Company in Beijing.Fang hasbeen a frequent writer on the Chinese economy for the Financial Times and the WallStreet Journal.He received his Ph.D.from the Department of Economics，StanfordUni-versity （1993）and his B.S.from the Department of Management Information Systems，Tsinghua University ，Beijing （1986）。

　　Yasheng Huang is Associate Professor at MIT Sloan School of Management and authorof Selling China（Cambridge ，2003）。

　　Joan Kaufman is Director of the AIDS Public Policy Program at the Center forBusiness and Government －Asia Programs of the Kennedy School of Government andLecturer in Social Medicine at Harvard Medical School as well as Senior Scientistat the Schneider Institute for Health Policy at the Heller School of Social Policyat Brandeis University.From 1996to 2001she was the Ford Foundation ＊s Genderand Reproductive Health Pro-gram Officer for China.She spent 2001－2as a fellowat the Radcliffe Institute for Ad-vanced Studies and 2002－3as a visiting fellowin the East Asian Legal Studies Program at Harvard Law School.She received herSc.D，from the Harvard School of Public Health，where she taught during the 1990s.Topics of recent publications include China ＊s SARS epidemic ，China ＊s AIDS epidemic，the gender impacts of health privatization in China ，and China ＊s family planningprogram.Dr.Kaufman speaks Mandarin and has lived in China for eleven years since1980.