Preprint Article Version 1 This version is not peer-reviewed

Capital Allocation Efficiency, SOEs Reform and China’s Economic Growth

Version 1 : Received: 14 January 2019 / Approved: 16 January 2019 / Online: 16 January 2019 (10:06:07 CET)

How to cite: LI, Z. Capital Allocation Efficiency, SOEs Reform and China’s Economic Growth. Preprints 2019, 2019010163 (doi: 10.20944/preprints201901.0163.v1). LI, Z. Capital Allocation Efficiency, SOEs Reform and China’s Economic Growth. Preprints 2019, 2019010163 (doi: 10.20944/preprints201901.0163.v1).

Abstract

This paper studies the mechanism of how China’s state-owned enterprise (SOEs) reform can influences economic growth, and distinguishes the capital efficiency between state-owned and private enterprises. The results show that: 1) the capital allocation efficiency among state-owned enterprises is lower than private enterprise due to an insufficiently released productivity of state-owned enterprises; 2) although with a higher capital allocation efficiency, the improvement of technology progress of private enterprises at a much slower pace compared to its rapidly increasing share in China’s economy. In case of poor allocation with private sector, blindly reforming ownership of state-owned enterprises cannot effectively alleviate the problem of efficiency losses. State-owned enterprise reform can boost economic growth by increasing capital marginal output, improving capital dynamic allocation efficiency, promoting TFP growth and exerting external spillovers on other firms. At present, China is exploring the endogenous power of economic growth, improving the market institutions and promoting the state-owned enterprises reform with positive and steady pace. By properly re-allocation SOEs into the private sector, which has significant influence on improving economic efficiency and promoting sustained economic growth.

Subject Areas

ownership reform; capital allocation; economic growth; total factors production

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