How Uncompetitive is the State-Owned Industrial Sector in China
AbstractThe profitability gap between state-owned enterprises and the non-state industrial sector in China is significant. Using a highly-disaggregated database of China’s industry in 2003, we estimate an average return to capital in state-owned enterprises about 9% that of foreign-invested firms, and about 59% of the return to capital in all non-state-owned industrial enterprises. Capital return differences are mainly driven by productivity differences, but the negative impact on SOEs’ rental rates of a relatively integrated labor market is not negligible. The rental rate gap is much higher in sectors that represent a small share in SOEs’ output and assets, meaning that the capital subsidies granted by the government have not biased SOEs’ production structure toward industries with greatest profitability gap. The inefficiency cost of distortions in relative factor prices is estimated between 5% and 8% of total industrial output.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 305.
Date of creation: 2005
Date of revision:
China; SOEs profitability; rental rate gap; productivity differences;
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- P3 - Economic Systems - - Socialist Institutions and Their Transitions
- P42 - Economic Systems - - Other Economic Systems - - - Productive Enterprises; Factor and Product Markets; Prices
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