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Can a tiger change its stripes? Reform of Chinese state-owned enterprises in the penumbra of the state

Author

Listed:
  • Harrison, Ann
  • Wang, Peichun
  • Zhao, Minyuan
  • Meyer, Marshall
  • Zhao, Linda

Abstract

The majority of state-owned enterprises (SOEs) in China were privatized through ownership reforms over the last three decades. Using a comprehensive dataset of all medium and large enterprises in China between 1998 and 2013, we show that privatized SOEs continue to benefit from government support relative to private enterprises. Compared to private firms that were never state-owned, privatized SOEs are favored by lower interest loans and higher government subsidies. Moreover, both SOEs and privatized SOEs significantly underperform relative to private firms, despite some improvements post-privatization. An exception is in improvements in productivity growth, where former SOEs match or exceed their private sector counterparts–results consistent with recent research. We also implement staggered difference-in-differences and matching estimation to account for treatment over multiple periods and selection into privatization. The tiger can change its stripes; however, former SOEs face a more supportive industrial policy regime relative to their private sector counterparts, affecting their performance.

Suggested Citation

  • Harrison, Ann & Wang, Peichun & Zhao, Minyuan & Meyer, Marshall & Zhao, Linda, 2026. "Can a tiger change its stripes? Reform of Chinese state-owned enterprises in the penumbra of the state," International Journal of Industrial Organization, Elsevier, vol. 104(C).
    • Handle: RePEc:eee:indorg:v:104:y:2026:i:c:s0167718725001079
    DOI: 10.1016/j.ijindorg.2025.103241
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    2. Stephan Heblich & Marlon Seror & Hao Xu & Yanos Zylberberg, 2019. "Industrial clusters in the long run: evidence from Million-Rouble plants in China," CESifo Working Paper Series 7682, CESifo.
    3. Barraza, Santiago & Rossi, Martín A & Ruzzier, Christian A, 2022. "Sleeping with the enemy: The perils of having the government on(the)board," Journal of Comparative Economics, Elsevier, vol. 50(3), pages 641-651.
    4. Jakopin Edvard & Gračanac Aleksandar & Aničić Jugoslav, 2021. "Restructuring of State Enterprises as a Prerequisite for Economic Growth in the Republic of Serbia," Economic Themes, Sciendo, vol. 59(1), pages 1-22, March.
    5. Mr. Jacques A Miniane & Ezequiel Cabezon & Mr. Sebastian Weber & Christine J. Richmond & Ms. Dora Benedek & Mr. James Roaf & Mr. Francisco J Parodi & Mr. Peter Dohlman & Rima Turk & Bobana Cegar & Mic, 2019. "Reassessing the Role of State-Owned Enterprises in Central, Eastern and Southeastern Europe," IMF Departmental Papers / Policy Papers 2019/010, International Monetary Fund.
    6. Carpenter, Jennifer N. & Lu, Fangzhou & Whitelaw, Robert F., 2021. "The real value of China’s stock market," Journal of Financial Economics, Elsevier, vol. 139(3), pages 679-696.
    7. Bae, Sung C. & Kwon, Taek Ho & Liu, Chenyang, 2024. "The impact of high-pressure political reforms on state-owned enterprises: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 91(C).
    8. Ouyang, Difei, 2024. "State-owned enterprise presence: Local spillovers," China Economic Review, Elsevier, vol. 84(C).
    9. Bayari, Celal, 2020. "The Neoliberal Globalization Link to the Belt and Road Initiative: The State and State-Owned-Enterprises in China [alternative title: Bilateral and Multilateral Dualities of the Chinese State in the Construction of the Belt and Road Initiative]," MPRA Paper 104471, University Library of Munich, Germany, revised 21 Jul 2020.
    10. Wang, Xun & Yu, Jingwen, 2023. "COVID-19 pandemic and corporate liquidity: The role of SOEs’ trade credit response," Journal of International Money and Finance, Elsevier, vol. 137(C).
    11. Wu, Yeyu & Xie, Sujuan & Xu, Yang, 2025. "Labor outcomes of partial privatization in state-owned enterprises: Evidence on employment and compensation under mixed ownership," International Review of Financial Analysis, Elsevier, vol. 105(C).
    12. Berkowitz, Daniel & Nishioka, Shuichiro, 2024. "The growth of firms, markets and rents: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 52(2), pages 383-399.

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    Keywords

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    JEL classification:

    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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