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same joint venture. The other 13% are “indirectly top 10,000 to 100,000 largest private owners are
connected” to the state through a joint venture with a indirectly connected to the state. Among owners
separate private owner that itself has equity ties with smaller than the top 100,000 largest owners, the vast
a state owner. majority (94%) have no equity connection to the state.
Largest private owners by registered capital *Distance = 0: State owners
Distance = 1: Private owners with direct equity ties to state owners
The analysis finds that as of 2019, there were more Distance > 1: Private owners with indirect equity ties to state owners
than 100,000 private owners in China that had direct
equity ties with state owners. These 100,000 private Increase in the number of private owners with equity ties to
owners collectively account for more than 15% of state owners 2000-2019
all registered capital in China. China’s largest private
owners also have significant equity stakes in smaller Proliferation of state-connected private owners.
private owners, who themselves invest in other
smaller private owners. In 2019, a total of 3.5 million The network of private owners with equity ties to
owners had such “indirect” ties to state owners. the state has expanded significantly over the last
These smaller, indirectly state-connected private 20 years. The number of private owners with direct
owners comprised an additional 18% of all registered equity ties to the state almost tripled between 2000
capital in China. There is a high share of both directly and 2019, and those with indirect equity ties rose
and indirectly state-connected private owners in 50-fold.
sectors where the state plays a dominant role, like
mineral extraction. During China’s period of rapid economic growth,
the size of the state sector declined, and the private
Nevertheless, researchers find that most state- sector expanded: the share of private owners in total
connected private owners’ businesses are still fully registered capital increased by 22 percentage points
owned by the private owner. Of the 236 companies between 2000 and 2019. However, this analysis also
partially or wholly owned by East Hope, for example, finds that the share of connected private owners in
210 are wholly owned by the East Hope family and total registered capital increased by 19.4 percentage
26 are joint ventures. Fourteen of the joint ventures points over the same period. In other words, almost
involve direct equity ties to state owners. all the increase in the share of private owners can be
attributed to the expansion of the state-connected
Smaller private owners less connected to private sector. Most of this increase is due to the
the state. expansion of private owners who have indirect equity
ties to the state versus private owners that have
China’s smaller private owners are more likely to be direct equity ties with state owners.
indirectly connected to the state or not connected at
all. Specifically, about 40% of owners among China’s Blurry lines between the state and private sector.
Taken together, these findings indicate that a large
share of China’s economy is neither completely state
owned nor completely privately owned but rather in
a gray zone of mixed ownership. In contrast to the
widely held view that state ties encumber private
enterprise, the proliferation of state-connected
private owners suggests that they benefit from their
equity ties to the state. As such, the rise of state-
connected private owners may be a significant driver
of China’s rapid growth.
SOUTH CHINA BUSINESS JOURNAL 26
connected” to the state through a joint venture with a indirectly connected to the state. Among owners
separate private owner that itself has equity ties with smaller than the top 100,000 largest owners, the vast
a state owner. majority (94%) have no equity connection to the state.
Largest private owners by registered capital *Distance = 0: State owners
Distance = 1: Private owners with direct equity ties to state owners
The analysis finds that as of 2019, there were more Distance > 1: Private owners with indirect equity ties to state owners
than 100,000 private owners in China that had direct
equity ties with state owners. These 100,000 private Increase in the number of private owners with equity ties to
owners collectively account for more than 15% of state owners 2000-2019
all registered capital in China. China’s largest private
owners also have significant equity stakes in smaller Proliferation of state-connected private owners.
private owners, who themselves invest in other
smaller private owners. In 2019, a total of 3.5 million The network of private owners with equity ties to
owners had such “indirect” ties to state owners. the state has expanded significantly over the last
These smaller, indirectly state-connected private 20 years. The number of private owners with direct
owners comprised an additional 18% of all registered equity ties to the state almost tripled between 2000
capital in China. There is a high share of both directly and 2019, and those with indirect equity ties rose
and indirectly state-connected private owners in 50-fold.
sectors where the state plays a dominant role, like
mineral extraction. During China’s period of rapid economic growth,
the size of the state sector declined, and the private
Nevertheless, researchers find that most state- sector expanded: the share of private owners in total
connected private owners’ businesses are still fully registered capital increased by 22 percentage points
owned by the private owner. Of the 236 companies between 2000 and 2019. However, this analysis also
partially or wholly owned by East Hope, for example, finds that the share of connected private owners in
210 are wholly owned by the East Hope family and total registered capital increased by 19.4 percentage
26 are joint ventures. Fourteen of the joint ventures points over the same period. In other words, almost
involve direct equity ties to state owners. all the increase in the share of private owners can be
attributed to the expansion of the state-connected
Smaller private owners less connected to private sector. Most of this increase is due to the
the state. expansion of private owners who have indirect equity
ties to the state versus private owners that have
China’s smaller private owners are more likely to be direct equity ties with state owners.
indirectly connected to the state or not connected at
all. Specifically, about 40% of owners among China’s Blurry lines between the state and private sector.
Taken together, these findings indicate that a large
share of China’s economy is neither completely state
owned nor completely privately owned but rather in
a gray zone of mixed ownership. In contrast to the
widely held view that state ties encumber private
enterprise, the proliferation of state-connected
private owners suggests that they benefit from their
equity ties to the state. As such, the rise of state-
connected private owners may be a significant driver
of China’s rapid growth.
SOUTH CHINA BUSINESS JOURNAL 26
