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Special Deals from Special Investors: The Rise of State-Connected Private Owners in China

Author

Listed:
  • Chong-En Bai

    (Tsinghua University - School of Economics & Management)

  • Chang-Tai Hsieh

    (University of Chicago - Booth School of Business; NBER)

  • Zheng Song

    (City University of Hong Kong)

  • Xin Wang

    (The Chinese University of Hong Kong - Department of Economics)

Abstract

We use administrative registration records with information on the owners of all Chinese firms to document the importance of “connected†investors, defined as state-owned firms or private owners with equity ties with state-owned firms, in the businesses of private owners. We document a hierarchy of private owners: the largest private owners have direct investments from state-owned firms, the next largest private owners have equity investments from private owners that themselves have equity ties with state owners, and the smallest private owners do not have any ties with state owners. The network of connected private owners has expanded over the last two decades. The share of registered capital of connected private owners increased by almost 20 percentage points between 2000 and 2019, driven by two trends. First, state owned firms have increased their investments in joint ventures with private owners. Second, private owners with equity ties to state owners also increasingly invest in joint ventures with other (smaller) private owners. The expansion in the “span†of connected owners from these investments with private owners may have increased aggregate output of the private sector by 4.2% a year between 2000 and 2019.

Suggested Citation

  • Chong-En Bai & Chang-Tai Hsieh & Zheng Song & Xin Wang, 2020. "Special Deals from Special Investors: The Rise of State-Connected Private Owners in China," Working Papers 2020-170, Becker Friedman Institute for Research In Economics.
    • Handle: RePEc:bfi:wpaper:2020-170
    as

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    File URL: https://repec.bfi.uchicago.edu/RePEc/pdfs/BFI_WP_2020170.pdf
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    References listed on IDEAS

    as
    1. Huang,Yasheng, 2008. "Capitalism with Chinese Characteristics," Cambridge Books, Cambridge University Press, number 9780521898102, November.
    2. Ruochen Dai & Dilip Mookherjee & Kaivan Munshi & Xiaobo Zhang, 2019. "The Community Origins of Private Enterprise in China," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-320, Boston University - Department of Economics.
    3. Chang-Tai Hsieh & Esteban Rossi-Hansberg, 2023. "The Industrial Revolution in Services," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 1(1), pages 3-42.
    4. Chong-en Bai & Chang-Tai Hsieh & Zheng Song, 2020. "Special Deals with Chinese Characteristics," NBER Macroeconomics Annual, University of Chicago Press, vol. 34(1), pages 341-379.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Cai, Guowei & Zhang, Xuejiao & Yang, Hao, 2022. "Fiscal stress and the formation of zombie firms: Evidence from China," China Economic Review, Elsevier, vol. 71(C).
    2. Ouyang, Difei, 2024. "State-owned enterprise presence: Local spillovers," China Economic Review, Elsevier, vol. 84(C).
    3. repec:ags:aaea22:335549 is not listed on IDEAS
    4. Li, Shuo & Wang, Min, 2025. "Environmental regulation and firms’ extensive margin decisions," Journal of Environmental Economics and Management, Elsevier, vol. 133(C).
    5. Li, Shuo & Wang, Min, 2022. "Environmental Regulation and Firms’ Extensive Margin Decisions," EfD Discussion Paper 22-15, Environment for Development, University of Gothenburg.
    6. Shi, Xiangyu & Xi, Tianyang & Zhang, Xiaobo & Zhang, Yifan, 2021. "“Moving Umbrella”: Bureaucratic transfers and the comovement of interregional investments in China," Journal of Development Economics, Elsevier, vol. 153(C).
    7. Han, Xuehui & Epetia, Ma. Christina F. & Cheng, Yuan, 2021. "“Subsidies” or “taxes”? Corporate credit misallocation induced by the nexus of state-owned enterprises and state-owned banks," Journal of Asian Economics, Elsevier, vol. 76(C).

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