A Model of China's State Capitalism

Yong Wang, Xuewen Liu and Xi Li
Additional contact information
Xuewen Liu: HKUST
Xi Li: HKUST

No 853, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: This paper documents a hallmark feature of China’s state capitalism as the state controlling the economy in a vertical structure: State-owned enterprises (SOEs) monopolize key industries in the upstream, whereas the downstream industries are largely open to private competition. We develop a general-equilibrium model to show that this unique vertical structure, when combined with openness and labor abundance, is critical in explaining the puzzling fact that China’s SOEs outperformed non-SOEs in the past decade while the opposite was true in the 1990s. We show how the upstream SOEs extract rents from the liberalized downstream industries in the process of industrialization and globalization. The unprecedented prosperity of SOEs is shown to be an efficiency-undermining symptom of the incompleteness of market-oriented reforms rather than a proof of SOE superiority. Emergence, sustainability, redistributive effects, and general implications for other countries of this state capitalism are also discussed.

Date: 2013
New Economics Papers: this item is included in nep-dge and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2013/paper_853.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:853

Access Statistics for this paper

More papers in 2013 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().