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MMUNITY NEWS
The Rise of the
State-Connected Private
Sector in China BySCCEIChinaBrief
Small businesses will face increased logistics and
e-commerce costs due to the retraction of widely
supported U.S. digital trade rules.
• Analysis of all 37.5 million registered firms in China reveals that
65% of the largest 1,000 private owners have direct equity ties with state
owners. All told, over 100,000 private owners had equity ties to the state,
comprising 15% of China’s registered capital in 2019.
• Large private owners also hold significant stakes in smaller firms
that themselves invest in other private owners. This results in 3.5 million
"indirectly state-connected" private owners, comprising an additional 18%
of China's registered capital in 2019.
• The number of private owners with direct equity ties with the state
almost tripled between 2000 and 2019, and those with indirect equity ties
rose 50-fold. The analysis suggests that equity ties to the state may have
aided, not constrained, the growth of China’s private sector.
Many observers associate the economic registered firms in the country, add up their
registered capital, and map their equity ties to state-
transformation of China over the last few decades owned firms and entities.
with the decline of the state sector and the rise of
the private sector. The share of state-owned firms in China’s largest private owners have direct
China’s industrial output, for example, fell from 50% equity ties to the state.
to under 30%, leading many to conclude that China’s
growth was driven in large part by the expansion Large “private owners” – i.e., private individuals or
of the private sector. How distinct are the lines of private business entities – often own many firms. East
ownership between the state and private sectors in Hope Aluminum, for example, owns at least a 10%
China today? equity share of 236 companies. Researchers found
that as of 2019, 78% of China’s largest 1,000 private
The data. Researchers analyzed all 37,546,000 firm owners have equity ties with a branch of central or
local government or a firm owned by central or local
registration records from the State Administration government – i.e., “state owners.” Roughly 65% of
for Market Regulation in 2013 and 2019. All of these 1,000 private owners are “directly connected”
China’s firms are legally obligated to register with this to state owners, meaning both the state owner and
body and list their immediate owners. This allows private owner have at least a 10% equity stake in
researchers to “peel” through layers of ownership
to determine the ownership networks of all private
25 AMCHAM SOUTH CHINA
The Rise of the
State-Connected Private
Sector in China BySCCEIChinaBrief
Small businesses will face increased logistics and
e-commerce costs due to the retraction of widely
supported U.S. digital trade rules.
• Analysis of all 37.5 million registered firms in China reveals that
65% of the largest 1,000 private owners have direct equity ties with state
owners. All told, over 100,000 private owners had equity ties to the state,
comprising 15% of China’s registered capital in 2019.
• Large private owners also hold significant stakes in smaller firms
that themselves invest in other private owners. This results in 3.5 million
"indirectly state-connected" private owners, comprising an additional 18%
of China's registered capital in 2019.
• The number of private owners with direct equity ties with the state
almost tripled between 2000 and 2019, and those with indirect equity ties
rose 50-fold. The analysis suggests that equity ties to the state may have
aided, not constrained, the growth of China’s private sector.
Many observers associate the economic registered firms in the country, add up their
registered capital, and map their equity ties to state-
transformation of China over the last few decades owned firms and entities.
with the decline of the state sector and the rise of
the private sector. The share of state-owned firms in China’s largest private owners have direct
China’s industrial output, for example, fell from 50% equity ties to the state.
to under 30%, leading many to conclude that China’s
growth was driven in large part by the expansion Large “private owners” – i.e., private individuals or
of the private sector. How distinct are the lines of private business entities – often own many firms. East
ownership between the state and private sectors in Hope Aluminum, for example, owns at least a 10%
China today? equity share of 236 companies. Researchers found
that as of 2019, 78% of China’s largest 1,000 private
The data. Researchers analyzed all 37,546,000 firm owners have equity ties with a branch of central or
local government or a firm owned by central or local
registration records from the State Administration government – i.e., “state owners.” Roughly 65% of
for Market Regulation in 2013 and 2019. All of these 1,000 private owners are “directly connected”
China’s firms are legally obligated to register with this to state owners, meaning both the state owner and
body and list their immediate owners. This allows private owner have at least a 10% equity stake in
researchers to “peel” through layers of ownership
to determine the ownership networks of all private
25 AMCHAM SOUTH CHINA
