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

Chong-En Bai, Chang-Tai Hsieh (), Zheng Song () and Xin Wang ()
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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

No 2020-170, Working Papers from Becker Friedman Institute for Research In 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.

Pages: 38 pages
Date: 2020
New Economics Papers: this item is included in nep-cna
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Citations: View citations in EconPapers (6)

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