Page 29 - The SouthChina Business Journal
P. 29
r 10-layer ownership tree. For example, China’s Additionally, while central and local governments
State Council (Layer 0) owns 100% of equity in are investing in a larger number of firms, the
CITIC Group (Layer 1). If researchers are applying average holding in firms is declining. Taken together,
the 100% ownership threshold, they would identify the evidence suggests that while keeping its stake
all firms 100% owned by CITIC Group (Layer 2), in firms, governments are moving more toward
and all firms 100% owned by those CITIC-owned indirect control of firms with state equity.
firms (Layer 3), and so on, down a layer-by-layer
ownership tree. Researchers used this approach for Mixed ownership benefits firms.
the five ownership thresholds, the results of which
are outlined in the table. The researchers find that state ownership tends
to boost firm growth and productivity and has
Firms with equity investments in other firms mixed effects on profitability. Firms with up to 10%
account for roughly 80% of the total capital of all central government ownership grow 48% faster in
firms in China’s economy. Among such “in-network” size (measured by total assets) than private firms.
firms, the total capital of firms with some state With even more central government ownership
ownership has increased from roughly 61% in 1999
to 85% in 2017. Meanwhile, the total capital of firms Registered capital of firms with some state ownership as
that are 100% state-owned has declined from 41% fraction of total registered capital in China’s economy
in 1999 to 25% in 2017. Among all firms with some
state ownership, the share of state ownership has (10–30%), they grow 73% faster in size than private
risen from 21% of all capital in 1999 to 31% in 2017. firms. The same is true for firms with provincial
level ownership stakes, but less so for city level
Decentralization of state equity and ownership stakes. While firms with less than 50%
indirect control. ownership are more productive and profitable,
firms 100% owned by the central government are
The state capital invested by the central less profitable.
government has declined from 37% in 1999 to 31%
in 2017, while that of provincial governments has Closer hierarchical ties to the state
increased from 9% to 35% in the same period, confers costs and benefits.
both over total capital of the in-network firms.
Firms closer to central and provincial governments
Registered capital of firms with some state ownership as in the ownership hierarchy tend to have higher
fraction of total registered capital in China’s economy growth rates in assets, while firms more remotely
owned by governments tend to have higher
profitability and efficiency. Compared to private
firms, firms with state ownership tend to have
lower borrowing costs on average. Firms with
mixed ownership also enjoy similar favorable
borrowing terms from state-owned banks as 100%
state-owned enterprises.
Reassessing the role of the state.
Taken together, the findings indicate that drawing a
stark distinction between SOEs and privately owned
firms may not reflect the role of the state in China’s
corporate sectors as well as the economy at large.
Using the new measure of state ownership in firms,
the analysis finds mixed state and private ownership,
especially indirect government ownership, may
combine the advantages of government support and
the efficiency of private firms.
SOUTH CHINA BUSINESS JOURNAL 26
State Council (Layer 0) owns 100% of equity in are investing in a larger number of firms, the
CITIC Group (Layer 1). If researchers are applying average holding in firms is declining. Taken together,
the 100% ownership threshold, they would identify the evidence suggests that while keeping its stake
all firms 100% owned by CITIC Group (Layer 2), in firms, governments are moving more toward
and all firms 100% owned by those CITIC-owned indirect control of firms with state equity.
firms (Layer 3), and so on, down a layer-by-layer
ownership tree. Researchers used this approach for Mixed ownership benefits firms.
the five ownership thresholds, the results of which
are outlined in the table. The researchers find that state ownership tends
to boost firm growth and productivity and has
Firms with equity investments in other firms mixed effects on profitability. Firms with up to 10%
account for roughly 80% of the total capital of all central government ownership grow 48% faster in
firms in China’s economy. Among such “in-network” size (measured by total assets) than private firms.
firms, the total capital of firms with some state With even more central government ownership
ownership has increased from roughly 61% in 1999
to 85% in 2017. Meanwhile, the total capital of firms Registered capital of firms with some state ownership as
that are 100% state-owned has declined from 41% fraction of total registered capital in China’s economy
in 1999 to 25% in 2017. Among all firms with some
state ownership, the share of state ownership has (10–30%), they grow 73% faster in size than private
risen from 21% of all capital in 1999 to 31% in 2017. firms. The same is true for firms with provincial
level ownership stakes, but less so for city level
Decentralization of state equity and ownership stakes. While firms with less than 50%
indirect control. ownership are more productive and profitable,
firms 100% owned by the central government are
The state capital invested by the central less profitable.
government has declined from 37% in 1999 to 31%
in 2017, while that of provincial governments has Closer hierarchical ties to the state
increased from 9% to 35% in the same period, confers costs and benefits.
both over total capital of the in-network firms.
Firms closer to central and provincial governments
Registered capital of firms with some state ownership as in the ownership hierarchy tend to have higher
fraction of total registered capital in China’s economy growth rates in assets, while firms more remotely
owned by governments tend to have higher
profitability and efficiency. Compared to private
firms, firms with state ownership tend to have
lower borrowing costs on average. Firms with
mixed ownership also enjoy similar favorable
borrowing terms from state-owned banks as 100%
state-owned enterprises.
Reassessing the role of the state.
Taken together, the findings indicate that drawing a
stark distinction between SOEs and privately owned
firms may not reflect the role of the state in China’s
corporate sectors as well as the economy at large.
Using the new measure of state ownership in firms,
the analysis finds mixed state and private ownership,
especially indirect government ownership, may
combine the advantages of government support and
the efficiency of private firms.
SOUTH CHINA BUSINESS JOURNAL 26
