Topic_7_Econ162bw - Economics 162 The Economy of China...

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Unformatted text preview: Economics 162 The Economy of China Topic 7 State Owned Enterprises Professor David Roland-Holst Department of Agricultural and Resource Economics Tuesday and Thursday, 12:30-2PM, 10 Evans Hall Roland-Holst 2 Economics 162 Economics 162 Economics 162 State Firms in Transition The state sector was the commanding height of the planned economy The state sector continues to be the pillar of the economy Dominates in strategic industries Pays more taxes Gets more bank loans and stock market finance State-owned enterprises are unfortunately the root of the labor and financial sector problems Cautions: Their roles in the economy have been declining because of the rise of the private sector But they are more significant than some statistics show, for example, most listed companies are controlled by the state Roland-Holst 3 Economics 162 Economics 162 Economics 162 Varieties of State Firms: By Level of Control Four levels of government control Central Provincial Municipality County About of SOEs are directly controlled by the central government, and the rest by local governments (mostly by municipal governments) Implications Diverse local government policies on SOE reform Local interests may differ from national interests, for example, local protectionism in automobile industry Roland-Holst 4 Economics 162 Economics 162 Economics 162 Varieties of State Firms: By Firm Size Large vs. small SOEs: Two different worlds Industrial SOE distribution by size (1993) number output employ ment assets Taxes and profits Large 5% 57% 43% 62% 67% Small 95% 43% 57% 38% 33% Roland-Holst 5 Economics 162 Economics 162 Economics 162 Varieties of State Firms: By Region Northeast Soviet type industrial base Many large and old SOEs High proportion of state firms Coastal Fewer state firms (such as Guangdong, Fujian, Zhejiang) for historical reasons Closer ties to overseas firms Inland Transportation problems Many defense industries Roland-Holst 6 Economics 162 Economics 162 Economics 162 SOEs: Changing Pattern of Finance SOEs financing sources: From the government budget to bank loans Implications: Heavily rely on indirect financing (bank financing) Very high debt-equity ratios Roland-Holst 7 SOEs: Bank Loan Financing 1978 1991 Budgetary capital expenditure/GDP 15% 5% Share of fiscal budget in financing 61% 27% Share of bank loans in financing 39% 73% Roland-Holst 8 SOEs: High Debt-Equity Ratios (1998) Tangible assets only With intangible assets SOEs 3.20 1.62 Foreign firms in China 1.77 1.28 HK, Taiwan firms in China 1.93 1.43 Roland-Holst 9 Industrial SOEs: Profit and Losses (% of GDP)-4%-2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Net Profits Losses Roland-Holst 10 Economics 162 Economics 162 Economics 162 Main Themes of SOE reforms: 1978-1993...
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This note was uploaded on 04/05/2009 for the course UGBA 137 taught by Professor Staff during the Spring '08 term at University of California, Berkeley.

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Topic_7_Econ162bw - Economics 162 The Economy of China...

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