Page 28 - The SouthChina Business Journal
P. 28
MMUNITY NEWS
Reassessing the Role
of State Ownership in
China’s Economy By SCCEI China Brief
• By conventional measures, China has 391,000 state-owned enterprises (SOEs), but new
analysis of state ownership among all 40 million registered firms in China finds that 363,000
firms are 100% state-owned, 629,000 firms are 30% state-owned, and nearly 867,000 firms
have at least some state ownership.
• The total capital of firms with some level of state ownership has risen to roughly 68%
of total capital of all firms (40 million) in the economy in 2017. The share owned by the central
government has declined while that of local governments has risen.
• Mixed state and private ownership is associated with higher firm growth, productivity,
and profitability. Firms with closer equity ties to China’s government tend to grow faster but are
less profitable and efficient than those with more distant equity ties.
Existing measures of state-owned enterprises a hierarchical network of firm ownership. Then,
(SOEs) generate widespread inconsistencies in to ascertain the effects of state ownership on
identifying state versus privately owned firms. By economic outcomes, researchers also measure
constructing a new measure of state ownership firm growth, profitability, and productivity using
that captures the total state capital investment AIS data.
in firms, researchers reassess the role of SOEs in
advancing China’s economy. Existing measures of SOEs flawed.
The data. Most measures of state versus privately owned
firms in China rely on data from the government’s
Researchers used the Firm Registration and AIS database to categorize firm ownership.
Ownership Database from China’s State However, AIS uses multiple variables to identify
Administration for Industry and Commerce (SAIC) SOEs that in practice generate widespread
to gather information on firms (i.e., registration inconsistencies in identification. The AIS database
capital, ownership type, and industry) and firm also suffers from large-scale misreporting issues.
shareholders from 1950 to 2017. To compare For example, firms may not change their ownership
firm ownership types, researchers also retrieved type from the initial record even after major
information from the Annual Industry Survey restructuring. State ownership status is also
(AIS) published by China’s National Bureau of self-reported by firms, some of which may have
Statistics and matched it with the SAIC data for incentives not to reveal the true and complete
a panel dataset of industrial firms and SOEs with structure, making the AIS records less reliable.
financial information from 1999 to 2013.
New measure captures a larger role of
By using information on the ownership networks state ownership in the economy.
of 40 million firms, researchers then create
ownership “trees” to re-examine the state’s To circumvent these issues, researchers looked
role in China’s economy. They first locate directly at equity stakes owned by state and local
firms controlled by the central, provincial, and governments. The researchers apply five different
city governments and then trace ownership state ownership thresholds to identify SOEs: 100%,
connections from these “root” firms based on 50% 30%, 10%, or greater than 0%. They then
firm-to-firm equity ownership ties to create measure equity ties for each threshold in an
25 AMCHAM SOUTH CHINA
Reassessing the Role
of State Ownership in
China’s Economy By SCCEI China Brief
• By conventional measures, China has 391,000 state-owned enterprises (SOEs), but new
analysis of state ownership among all 40 million registered firms in China finds that 363,000
firms are 100% state-owned, 629,000 firms are 30% state-owned, and nearly 867,000 firms
have at least some state ownership.
• The total capital of firms with some level of state ownership has risen to roughly 68%
of total capital of all firms (40 million) in the economy in 2017. The share owned by the central
government has declined while that of local governments has risen.
• Mixed state and private ownership is associated with higher firm growth, productivity,
and profitability. Firms with closer equity ties to China’s government tend to grow faster but are
less profitable and efficient than those with more distant equity ties.
Existing measures of state-owned enterprises a hierarchical network of firm ownership. Then,
(SOEs) generate widespread inconsistencies in to ascertain the effects of state ownership on
identifying state versus privately owned firms. By economic outcomes, researchers also measure
constructing a new measure of state ownership firm growth, profitability, and productivity using
that captures the total state capital investment AIS data.
in firms, researchers reassess the role of SOEs in
advancing China’s economy. Existing measures of SOEs flawed.
The data. Most measures of state versus privately owned
firms in China rely on data from the government’s
Researchers used the Firm Registration and AIS database to categorize firm ownership.
Ownership Database from China’s State However, AIS uses multiple variables to identify
Administration for Industry and Commerce (SAIC) SOEs that in practice generate widespread
to gather information on firms (i.e., registration inconsistencies in identification. The AIS database
capital, ownership type, and industry) and firm also suffers from large-scale misreporting issues.
shareholders from 1950 to 2017. To compare For example, firms may not change their ownership
firm ownership types, researchers also retrieved type from the initial record even after major
information from the Annual Industry Survey restructuring. State ownership status is also
(AIS) published by China’s National Bureau of self-reported by firms, some of which may have
Statistics and matched it with the SAIC data for incentives not to reveal the true and complete
a panel dataset of industrial firms and SOEs with structure, making the AIS records less reliable.
financial information from 1999 to 2013.
New measure captures a larger role of
By using information on the ownership networks state ownership in the economy.
of 40 million firms, researchers then create
ownership “trees” to re-examine the state’s To circumvent these issues, researchers looked
role in China’s economy. They first locate directly at equity stakes owned by state and local
firms controlled by the central, provincial, and governments. The researchers apply five different
city governments and then trace ownership state ownership thresholds to identify SOEs: 100%,
connections from these “root” firms based on 50% 30%, 10%, or greater than 0%. They then
firm-to-firm equity ownership ties to create measure equity ties for each threshold in an
25 AMCHAM SOUTH CHINA
