Centralization or Decentralization? The Evolution of State-Ownership in China

69 Pages Posted: 5 Dec 2022

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Junhui Cai

University of Notre Dame - Mendoza College of Business

Xian Gu

Durham University Business School

Jun "QJ" Qian

Fudan University - International School of Finance (FISF); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Linda Zhao

University of Pennsylvania - Statistics Department

Wu Zhu

School of Economics and Management, Tsinghua University

Date Written: November 17, 2022

Abstract

We re-examine the state sector and its role in the Chinese economy by using the information on the ownership networks of 40 million firms for 1990-2017. We propose a new measure of state-owned enterprises (SOEs) and partial SOEs based on the firm-to-firm equity investment relationships. Our measure captures a significantly larger number of SOEs than the existing measures. The aggregated registered capital of all the SOEs (including partial SOEs) has climbed up to 85%, and the total state capital in all the SOEs has increased to 31%, both over total capital in the economy by the end of 2017. State ownership shows parallel trends of decentralization and indirect control over time. Mixed ownership is associated with higher firm growth and better performance as measured by higher profitability and productivity, while a greater hierarchical distance to the central and provincial governments is associated with better firm performance but lower growth.

Keywords: state-owned enterprises; state capital; ownership network; hierarchical distance

JEL Classification: G30; P16

Suggested Citation

Allen, Franklin and Cai, Junhui and Gu, Xian and Qian, Jun and Zhao, Linda and Zhu, Wu, Centralization or Decentralization? The Evolution of State-Ownership in China (November 17, 2022). Available at SSRN: https://ssrn.com/abstract=4283197 or http://dx.doi.org/10.2139/ssrn.4283197

Franklin Allen (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Junhui Cai

University of Notre Dame - Mendoza College of Business

Mendoza college of business
University of Notre Dame
Notre Dame, IN 46556-5646
United States

Xian Gu

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Jun Qian

Fudan University - International School of Finance (FISF) ( email )

220 Handan Road
Shanghai, 200433
China

HOME PAGE: http://fisf.fudan.edu.cn/en_show-112-69.html

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Linda Zhao

University of Pennsylvania - Statistics Department ( email )

Wharton School
Philadelphia, PA 19104
United States

Wu Zhu

School of Economics and Management, Tsinghua University ( email )

Beijing, PA 19104
China

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