New | Reform is a tall order
Despite suggestions the private sector is gaining ground on the mainland, state-owned firms are more dominant than ever, with the past decade seeing a reversal of earlier liberalisation gains
In an essay published in the Financial Times eight years ago, I said China's private sector was in the shadow of the state.
I can make the same argument today with one significant difference: the state sector’s dominance in China has grown considerably in the last eight years.
The last decade has almost completely undone the reforms of the two previous decades.
The consensus in the West is that China’s state sector is corrupt, inefficient and ideologically inferior, so it must be losing ground against private enterprise which is steadily chipping away at the communist, state-backed old guard.
That is just not the case.
The playing field is unfair and aligned against the private sector.
Nicholas Lardy, in a recent Bloomberg Brief piece, compared the financial performance of China’s state sector with the private sector. Citing the National Statistics Bureau, his numbers were predictable: last year, the state sector return on assets (ROA) was merely 4.6 per cent and well below the private sector’s 12.4 per cent.