Fast-Falling Barriers and Growing Concentration: The Emergence of a Private Economy in China

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Fast-Falling Barriers and Growing Concentration: The Emergence of a Private Economy in China

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Sean Dougherty
Richard Herd ()

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Sean M. Dougherty

Abstract

This paper assesses the progress of China’s transition toward a market economy by examining the structure of ownership, productivity, and profitability, as well as the concentration of production across firms, industries and regions. It does this by analyzing a database of firm microdata of the quarter of a million industrial companies in operation during the 1998–2003 period. Results show that the private sector now accounts for more than half of industrial output, compared with barely more than a quarter in 1998, and operates much more efficiently than the public sector. Higher productivity has fed through to profitability, motivating greater regional specialization of production. These changes are consistent with what would be expected in a market-based economy, and suggests that reforms are making rapid progress. This Working Paper relates to the 2005 OECD Economic Survey of China (www.oecd.org/eco/surveys/china).

La chute rapide des barrières et la concentration croissante de l’activité économique : L’émergence d’un secteur privé en Chine
Ce document examine les progrès réalisés par la Chine dans la transition vers une économie de marché en étudiant plus particulièrement la structure de la propriété, la productivité et la rentabilité, ainsi que la concentration de la production à l'échelle des entreprises, des secteurs d'activité et des régions. Pour cela, il analyse une base de microdonnées portant sur 250 000 entreprises industrielles qui étaient en activité au cours de la période 1998-2003. Les résultats montrent que le secteur privé représente désormais plus de la moitié de la production industrielle, contre à peine plus d'un quart en 1998, et qu'il est bien plus efficace que le secteur public. Par ailleurs, l'accroissement de la productivité et ses effets positifs sur la rentabilité de l'activité économique ont entraîné une plus grande spécialisation régionale de la production. Ces évolutions, conformes à ce que l'on peut attendre dans une économie fondée sur le jeu du marché, sont sans doute le signe que les réformes progressent rapidement. Ce Document de travail se rapporte à l'Étude économique de l'OCDE de la Chine, 2005 (www.oecd.org/eco/etudes/chine).

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Paper provided by OECD Economics Department in its series OECD Economics Department Working Papers with number 471.

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Date of creation: 16 Dec 2005
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Handle: RePEc:oec:ecoaaa:471-en

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Find related papers by JEL classification:
D4 - Microeconomics - - Market Structure and Pricing
F15 - International Economics - - Trade - - - Economic Integration
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-01-24 (All new papers)
NEP-CNA-2006-01-24 (China)
NEP-COM-2006-01-24 (Industrial Competition)
NEP-HIS-2006-01-24 (Business, Economic & Financial History)
NEP-SEA-2006-01-24 (South East Asia)
NEP-TRA-2006-01-24 (Transition Economics)

Cited by:
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Ray Brooks & Steven Barnett, 2006. "What's Driving Investment in China?," IMF Working Papers 06/265, International Monetary Fund. [Downloadable!]
Richard Herd & Sean Dougherty, 2007. "Growth Prospects in China and India Compared," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 4(1), pages 65 - End , June. [Downloadable!]

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