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Reform and Competitive Selection in China: An Analysis of Firm Exits

Qing Yang () and Paul Temple

No 409, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: This paper considers aspects of the competitive selection process in China - firm entry, survival, and exit - in an important sector of manufacturing, looking in particular for changes resulting from the latest stage of reforms. Using industry survey data from a province in North-East China, we find substantial differences in the process between ownership types. By conducting a simple decomposition of the aggregate productivity growth and exploring the determinants of firm’s exit using a hazard rate model, we observe a substantial rate of churning of enterprises in the sector, and find that the competitive selection processes operate, for small and collectively owned enterprises (COEs), in a manner consistent with a private market economy. In contrast, such processes appear not to be functioning for state owned enterprises (SOEs). We conclude that competitive selection in China is not providing a sufficiently strong substitute for corporate governance based on ownership.

Keywords: Competition; Exit; Productivity, Hazard Models (search for similar items in EconPapers)
JEL-codes: C5 D2 L6 P5 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2009-09
New Economics Papers: this item is included in nep-cna, nep-com, nep-ent and nep-tra
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Citations: View citations in EconPapers (4) Track citations by RSS feed

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Journal Article: Reform and competitive selection in China: An analysis of firm exits (2012) Downloads
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