Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China
Based on a survey that we designed and that covers a stratified random sample of 12,400 firms in 120 cities in China with firm-level accounting information for 2002-2004, this paper examines the presence of systematic distortions in capital allocation that result in uneven marginal returns to capital across firm ownership, regions, and sectors. It provides a systematic comparison of investment efficiency among wholly and partially state-owned, wholly and partially foreign-owned, and domestic privately owned firms, conditioning on their sector, location, and size characteristics. It finds that even after a quarter-of-century of reforms, state-owned firms still have significantly lower returns to capital, on average, than domestic private or foreign-owned firms. Similarly, certain regions and sectors have consistently lower returns to capital than other regions and sectors. By our calculation, if China succeeds in allocating its capital more efficiently, it could reduce its capital stock by 8 percent without sacrificing its economic growth (and hence could raise its household consumption and deliver a faster improvement to its citizens' living standard).
|Date of creation:||May 2007|
|Date of revision:|
|Publication status:||published as David Dollar & Shang-Jin Wei, 2007. "Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China," IMF Working Papers, vol 07(9).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wendy Dobson & Anil K. Kashyap, 2006. "The Contradiction in China's Gradualist Banking Reforms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2), pages 103-162.
- Park, Albert & Sehrt, Kaja, 2001.
"Tests of Financial Intermediation and Banking Reform in China,"
Journal of Comparative Economics,
Elsevier, vol. 29(4), pages 608-644, December.
- Albert Park and Kaja Sehrt & Albert Park and Kaja Sehrt, 1999. "Tests of Financial Intermediation and Banking Reform in China," William Davidson Institute Working Papers Series 270, William Davidson Institute at the University of Michigan.
- Chong-En Bai & Chang-Tai Hsieh & Yingyi Qian, 2006.
"The Return to Capital in China,"
NBER Working Papers
12755, National Bureau of Economic Research, Inc.
- Kui-Wai Li, 2004.
"China's Capital and Productivity Measurement Using Financial Resources,"
Yale School of Management Working Papers
ysm338, Yale School of Management.
- Kui-Wai Li, 2003. "China's Capital and Productivity Measurement Using Financial Resources," Working Papers 851, Economic Growth Center, Yale University.
- Genevieve Boyreau-Debray & Shang-Jin Wei, 2005.
"Pitfalls of a State-Dominated Financial System: The Case of China,"
NBER Working Papers
11214, National Bureau of Economic Research, Inc.
- Boyreau-Debray, Genevieve & Wei, Shang-Jin, 2004. "Pitfalls of a State-Dominated Financial System: The Case of China," CEPR Discussion Papers 4471, C.E.P.R. Discussion Papers.
- Allen, Franklin & Qian, Jun & Qian, Meijun, 2005.
"Law, finance, and economic growth in China,"
Journal of Financial Economics,
Elsevier, vol. 77(1), pages 57-116, July.
- Wendy Dobson & Anil K Kashyap, 2006. "The Contradiction in China’s Gradualist Banking Reforms," Working Papers Series 08, Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:13103. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.