Evolving Ownership Structures in Private Enterprises in China: the Case of Ningbo

Zhong Qin and Wenli Cheng

No 12-13, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: This paper develops a theoretical model to study features of the spontaneous growth of private enterprises in China’s Zhejiang province. The model predicts that in a developing economy where the market environment is immature or unstable, the ownership structure of a typical private enterprise involves a cooperative arrangement between a party with management skills and another party with Guanxi (connections). As the market environment becomes more stable, the ownership share of the party with management skills increases. This result is confirmed by empirical evidence. Observations of the pattern of private sector growth suggest that ownership structures of private enterprises were strongly influenced by the market environment. Empirical analysis based on a survey of 296 firms in Ningbo city of China shows that the perceived importance of both government and family Guanxi declined with perceived improvements in market stability.

Keywords: Guanxi; ownership structure; quality of economic environment; private enterprises in China (search for similar items in EconPapers)
JEL-codes: L20 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012-03
New Economics Papers: this item is included in nep-tra
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