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Measurement Issues and General Patterns

Table 1.2 provides a glimpse of the changing landscape of nonfarm economic organizations in the post-Mao era. It shows that the number of public enterprises increased substantially before the mid-1990s but experienced contraction in the next two decades, when private and quasi-private entities demonstrated significant growth, especially during the last decade shown. To go beyond this broad view for a closer assessment of the magnitude of private economic activities, it would be useful to examine data on three major indicators: assets, output value, and workforce. Unfortunately, the Chinese government has never published full and detailed information that can be used to

Table 1.2 Number (millions) of industrial and commercial organizations

Year

SOEs

Collective

enterprises

Shareholding

companies

Foreign-invested

enterprises

Private

enterprises

getihu

1984

0.8

2.85

0.002 (63%)

9.33

1994

7

5.46

0.09

0.21 (78%)

0.43

21.87

2004

0.92

1.39

1.22

0.32 (46%)

4.02

23.51

2014

0.35

0.45

1.33

0.46 (17%)

15.46

49.84

Notes: (a) SOEs include traditional (pre-1994) SOEs, state-controlled companies and solely state-owned limited liability companies; (b) figures in parentheses are shares of joint ventures in foreign-invested enterprises.

Sources: SICA 1994, 2004, 2014; SFYCICA.

cross-tabulate these indicators with different ownership types and compare the results over time.29

In the case of assets, no systematic data exist on the farming sector (Pei Changhong 2014), where farmland has remained publicly owned and been contracted out to rural households since the dismantling of the people’s commune system in the late 1970s and early 1980s, while other farm assets have been mainly privately owned. Limited information is available on the assets of nonfarm economic organizations. Before the accounting system reform in 1993 (Wu and Patel 2015), no balance sheet data were reported by domestic industrial and commercial enterprises, as the old accounting system was designed to record and track fund use and flow for a centrally planned system based on public ownership. Nor were land and intangibles (copyrights, trademarks, brand names, etc.) valued and included as asset items. Except for the industrial sector and nonfinancial SOEs, most of the asset data collected since 1993 are not released. It was not until 2004, when the first economic census was conducted (and then followed by the second and third ones in 2008 and 2013 respectively), that asset data were collected on all economic organizations in the secondary and tertiary sectors, thus providing a baseline for assessing the relative significance of public enterprises. However, the government has withheld much of the ownership- related information that can be used for cross-tabulation, with the data on the financial sector being most closely guarded. Despite these limitations, 29. The quality of published data is another issue, which cannot be addressed in this book. See Holz 2014 and Rawski 2001 for assessments of the quality of China’s GDP data.

from the data available it is still possible to discern some general patterns and trends.

Table 1.3 shows that the shares of public enterprises in industrial assets have declined. Although the scope of the time series varies for different periods, it is still clear that the decline was more drastic around the turn of the century and that collective enterprises have lost much of their significance.

Table 1.3 Shares (%) of public and nonpublic enterprises in industrial assets, 1993-2014

Year

SOEs

Collective

“Label-less”

Sino-foreign joint

Private

enterprises

shareholding co.

ventures

entities

(1) Coverage: industrial enterprises with independent accounting status at or above the township level

1993

71.9 (65.9)

19.7 (i6.9)

1994

61.5 (56.7)

19.1 (16.3)

1995

59.9 (59л)

i8.i (i4.8)

5.5

i3

3.5

1996

58.6 (58.1)

17.4 (14.2)

1997

57.1 (55.9)

i6 (i3.2)

(2) Coverage: all industrial SOEs and non-SOEs with annual sales of no less than 5 million yuan

1998

68.8 (67.8)

i0.4 (i6)

1999

68.8 (68.5)

9 (12.9)

2000

66.6 (66.2)

7.6 (6.7)

2001

64.9 (64.5)

5.9 (5.2)

2002

60.9 (60)

5 (4.4)

2003

56 (55.5)

4.i (3.8)

2004

50.9 (52.6)

3.7

i0.3

i4

2i.i

2005

48.1 (49.2)

2.2

9.5

i3.5

26.7

2006

46.4 (47.5)

i.9

i0

i2.4

29.3

(3) Coverage: all industrial enterprises with annual sales of no less than 5 million yuan

2007

44.8 (45.8)

i.6

9.8

i2.8

3i

2008

43.8 (42.4)

i.2

ii.i

i2

3i.9

2009

43.7 (4i.2)

i

i0.5

ii.8

33

2010

41.8 (39.1)

0.9

11.5

ii.4

34.4

(continued)

Table 1.3 Continued

Year

SOEs

Collective

enterprises

“Label-less” shareholding co.

Sino-foreign joint ventures

Private

entities

(4) Coverage: all industrial enterprises with annual sales of no less than 20 million yuan

2011

41.7 (38.7)

0.8

13

11

33.5

2012

40.6 (37.5)

0.7

14.7

10.2

33.8

2013

40.3 (36.4)

0.7

15

9.9

34.1

2014

38.8 (34.8)

0.6

i7-3

9.5

33.8

(5) Coverage: all industrial enterprises in economic census years

2004

40.5

3

8.2

11.1

37.2

2008

39.5

1.1

10.1

10.8

38.5

2013

35.1

Note: Figures in parentheses are shares in equity capital.

Sources: CSY(various years), CECY2004, 2008, 2013, FYC201$; SSIC 1995, vol. 1; CIESY2006.

Table 1.4 Shares (%) ofpublic enterprises in secondary and tertiary sector assets

Year SOE share among nonfinancial entities

Share of collective enterprises

2004

34-9

5-4

2008

33-9

2.1

2013

33.8

Note: The shares of SOEs in all secondary and tertiary sector assets as reported in the statistical summaries of the three economic censuses do not include those of state-controlled joint-stock companies and therefore cannot used as indicators for all state sector entities. The alternative measure reported in this table is derived by dividing the total assets of nonfinancial SOEs with the total assets of nonfinancial economic organizations reported in the three economic censuses reported in the Finance Yearbook of China.

Sources: http://www.stats.gov.cn/tjsj/tjgb/jjpcgb/; CECY2004, 2008, 2013; FYC2010, 201$.

The shares of “quasi-private” industrial entities stabilized after 2004, whereas the expansion of private enterprises continued until 2010. The more encompassing information reported in Table 1.4 confirms the overall shrinkage of SOEs after the turn of the century. It also suggests that the decline of SOEs may have eased in the postprivatization years, though. But there is no sign of a trend reversal—even during 2008-2013, which was the focal period of theguojin mintui debate. The widening gap between industrial SOEs’ shares in assets and equity capital (reported in parentheses in table 1.3) after 2007 further indicates that the assets of SOEs consisted of increasingly more liabilities than those of private and quasi-private organizational types. An implication of this is that the easing in SOEs’ declining asset shares during the past decade may have been at least in part aided by heavier use of financial leverage under continued preferential treatment by the state-dominated banking system.

Ascertaining the share of public enterprises in economic output is equally difficult. In 1993 the Chinese government replaced the Soviet-style “material product system” (MPS) with the Western-style “system of national accounts” (SNA) for accounting and output reporting. Since then it has compiled and reported gross domestic product (GDP) as the main indicator of economic output and reconstructed the data series for the years before 1993. But, again, the government has withheld information on many economic sectors, organizational types, and time periods. As a result, it is not possible to derive directly from published data an economy-wide view of the changing contributions from public and nonpublic entities. Nevertheless, one can still piece together a partial picture from two limited time series—one on the industrial sector and the other on nonfarm economic activities in rural areas.

Table 1.5 shows that the GDP contributions by publicly owned industrial enterprises and by rural collective enterprises both declined from their peak levels in the mid-1990s. Collective industrial enterprises and collective enterprises in the rural nonfarm sector experienced steady declines in both absolute terms and relative to the all-inclusive groups. In contrast, the decline of industrial SOEs reached a bottom in 1997, when massive privatization began. Interestingly, their GDP share edged up in the ensuing decade, though this was not enough to reverse the decline of the public sector’s share in both industrial GDP and total GDP (see the next paragraph). It is unclear whether the trend continued after 2007 and whether it took place among nonindustrial SOEs as well. It also remains to be carefully investigated whether the limited bounceback during and after massive privatization was due to improvement in governance, monopoly positions held by remaining SOEs in upstream industries that rode on the economic expansion in the postprivatization era (Wang 2015), or both.

For GDP shares of public and nonpublic entities in the economy as a whole, no published information can be used for making a direct calculation. Estimates are legion, though. Table 1.6 provides a brief summary. It

Table 1.5 Shares (%) of contributions by public enterprises to GDP

Year

GDP % of industrial enterprises

GDP % of rural nonfarm entities

All

SOEs

Collective enterprises

All

Collective enterprises

i978

5.8

1980

6.4

1985

8.5

6.2

i99°

13.4

8.9

1991

13.6

9.3

1992.

38.2

19.3

7-i

16.7

ii.2

1993

40.2

20.6

10.8

22.7

i4.5

1994

40.4

16.4

8.6

22.7

i4.5

1995

41

13.7

6.4

24

i5.4

1996

41.4

12.3

7.3

24.8

i4.4

1997

41.7

11.6

6.7

26.3

12.7

1998

40.3

13.1

3.9

26.3

ii.8

1999

40

13.5

3.5

27.7

ii.i

2000

40.4

13.9

3.1

27.4

9.5

2001

39.7

13.4

2.4

26.8

8.3

2002

39.4

13.2

2.1

26.9

4

2003

40.5

13.9

1.9

27

2.8

2004

40.8

14.5

1.8

26.2

i.8

2005

42.2

14.8

1.4

27.6

i.4

2006

43.1

15.4

1.2

27.3

i.3

2007

43

15.5

1.2

27.i

i

2008

28

0.8

2009

27.4

0.7

2010

28

0.7

Notes: (a) Contributions from industrial enterprises in the public sector are defined as shares of industrial value-added in GDP; (b) the scopes of coverage for publicly owned industrial enterprises during different periods are the same as those indicated in table 1.3; (c) breakdown figures on industrial value-added are unavailable for the years before 1992 and after 2007.

Sources: CSY(various years); CIESY2006, 2007, 2008; CTEY(various years); CTEAPPY(var- ious years).

seems clear that the overall share of publicly owned entities has declined. The two most recent estimates—by Pei Changhong (2014) and jointly by the World Bank and the Development Research Center of the State Council (2014, 104)—put the share of the nonpublic sector and that of the

Table 1.6 Estimates of contribution (%) by the nonpublic sector to GDP

Year

Estimate

Source

1998

5°.4

OECD 2005

51

Garnaut et al. 2005; Gregory et al. / IFC 2000

2000

55

Huang Mengfu 2005

2003

59.2

OECD 2005

70

Fan Gang 2003

2004

6l

Li Chengrui 2006

63 (nonfarm)

Yang Xinming and Yang Jixue 2012

2005

65

Huang Mengfu 2005

2008

70 (nonfarm)

Yang Xinming and Yang Jixue 2012

69.7 (nonfarm)

Pei Changhong 2014

2010

70

World Bank and Development Research Center of the State Council 2013

2012

67.6 (nonfarm)

Pei Changhong 2014

2014

70

World Bank 2014

Note: Li Chengrui was director (1981-1984) of the State Statistical Bureau; Fan Gang is director of the National Economic Research Institute (http://www.china.com.cn/chinese/ OP-c/277946.htm); Huang Mengfu was chairman of the All China Federation of Industry and Commerce (http://theory.people.com.cn/GB/49154/49155/3981648.html); Pei Changhong is director of the Institute of Economics, Chinese Academy of Social Sciences.

nonstate sector at 71% (in 2012) and 70% (in 2010-2014) respectively.[1] If one uses the latter as the benchmark and deducts 2% from the non-SOE portion as the share of collective enterprises,[2] then a more conservative estimate for the share of the nonpublic sector in total GDP would be 68% for 2014.

There are more detailed and systematic (albeit not without gaps) data series about the workforce and its distribution among organizations of different ownership forms. Given such data availability and considering the importance of employment in socioeconomic life and to political decision-makers,

I will focus more on this indicator for assessing the relative magnitude of the nonpublic sector in the remainder of the book. The summary statistics in tables 1.7 and 1.8 reveal several important facts. First, public enterprises made substantial contributions to nonfarm job creation from 1980 through 1995, yet the result was not strong enough to maintain their initially dominant position in nonfarm employment.

Second, the significance of public sector employment declined sharply in both absolute and relative terms during the ensuing decade, when massive privatization was in full force. Collective enterprises experienced much greater shrinkage than state-owned entities, as suggested by the rising percentages of the latter in the remaining public sector workforce. Although the pace of decline slowed down in the postprivatization years, the trend continued. By 2014 the share of public sector employment in the entire workforce had dropped below 10%.[3]

Third, the overall significance of quasi-private enterprises in nonfarm employment rose steadily from the mid-1990s onward. But this was solely because of the growth of shareholding enterprises, as the share of Sino-foreign joint ventures actually shrank. In the meantime the share of the residual category—private or predominantly privately owned entities—also substantially grew, most probably passing the 70% level in 2014.

Fourth, there were variations between urban and rural areas and among different provinces. Table 1.6 shows that during the first decade of reforms, public sector employment dominated urban areas but experienced serious erosion in rural areas. Within the rural sector, there were also considerable variations among different provinces. In the next decade, the growth of employment outside the public sector continued in rural areas, which was paralleled by a similar but more speedy trend of change in urban areas. These changes not only extended into the decade following the start of massive privatization in 1997 but were accompanied by greater variability within urban and rural sectors, as indicated by the increase in the coefficient of variation.

To sum up, the foregoing survey illustrates a steady growth of private ownership in the post-Mao era. It also highlights a concurrent process of change, where public enterprises initially experienced expansion in absolute terms but subsequently declined, with collective enterprises under local authorities leading the way, both up and down, and at uneven paces across regions.

Table 1.7 Changing significance of public entities and quasi-private entities in nonfarm employment

Year Nonfarm

employment in public entities (millions)

Share (%) of public sector employment in nonfarm workforce

Share (%) of state-owned entities in public sector employment

Share (%) of shareholding enterprises in nonfarm workforce

Share (%) of Sino-foreign joint ventures in nonfarm workforce

1980

133.5

99.4

60.1

1985

164.6

83.2

54.6

199°

184.9

70.3

56

1991

190.6

71.7

55.9

2.4

1992

i96.9

70.6

55.3

5.i

1993

200.8

67.i

55.4

0.5

6.7

1994

204.0

67.0

55

i.0

1995

204.7

64.2

55

i.0

1996

202.i

60.5

55.6

i.i

1997

i92.6

56.9

57.4

i.4

1998

i58.5

46.4

57.1

2.6

1999

i46.5

4i.7

58.5

2.9

2000

i34.3

37.3

60.3

3.2

2001

i23.0

33.i

62.i

3.6

3.6

2002

i20.9

31.4

59.3

4.2

2003

9i.i

22.9

75.5

4.7

2004

86.i

20.9

78

5.0

3.5

2005

79.8

18.7

81.3

5.7

2006

77.2

i7.4

83.3

6.0

2007

76.4

i6.6

84.i

6.2

2008

75.7

i5.9

85.2

6.4

3.3

2009

74.2

i5.2

86.5

6.9

2010

75.0

i4.8

86.8

7.2

2011

76.7

i4.7

87.4

8.5

2012

78.0

i4.6

87.6

9.4

2013

73.2

i3.3

86.9

i4.2

2.8

2014

72.4

i2.9

87.2

i4.4

Notes: (a) State-owned entities include both economic organizations and noneconomic organizations (including party and government agencies); (b) shareholding enterprises refer to limited liability companies and joint-stock companies that are not categorized as state-controlled companies or private enterprises.

Sources: CSY(various years); YICAC1992,1993,1994; CTEY(various years); CTEAPPY(various years); CECY2004, 2008, 2013; CSNCBU.

Table 1.8 Share (%) ofpublicly owned entities in secondary and tertiary

sector employment

1985

1988

1998

2008

Rural

Urban

Rural

Urban

Rural

Urban

Rural

Urban

Nationwide

60

96

51

96

38

51

3

24

Anhui

43

91

38

91

38

66

7

39

Beijing

88

99

83

98

80

80

16

24

Chongqing

93

89

64

74

2

29

Fujian

65

95

52

90

34

56

5

24

Gansu

62

95

42

93

36

71

9

55

Guangdong

63

94

52

89

61

60

7

21

Guangxi

37

93

28

90

21

70

4

44

Guizhou

28

93

21

92

29

72

6

53

Hainan

46

94

33

92

21

69

12

42

Hebei

42

98

37

97

28

73

7

48

Heilongjiang

72

95

65

94

35

87

4

50

Henan

39

95

30

95

36

76

4

48

Hubei

58

97

52

96

47

67

8

40

Hunan

52

30

65

11

39

Jiangsu

84

97

76

97

55

76

2

19

Jiangxi

48

97

45

95

30

68

2

42

Jilin

53

94

41

93

20

71

3

43

Liaoning

73

94

64

93

30

74

6

36

Neimenggu

38

96

31

95

14

75

2

42

Ningxia

37

98

36

97

19

76

3

43

Qinghai

66

95

43

93

29

65

10

44

Shaanxi

53

97

41

96

24

69

6

54

Shandong

70

98

60

97

44

52

3

35

Shanghai

96

87

94

85

56

8

22

Shanxi

59

98

54

95

52

76

8

56

Sichuan

55

96

43

95

30

82

3

38

Tianjin

88

98

84

97

62

73

6

31

Xinjiang

67

42

27

82

9

50

Xizang

57

86

19

43

Yunnan

58

96

51

95

28

76

5

37

Zhejiang

81

97

74

95

43

61

2

16

CV (%)

2.9.7

1.99

36.3

2.6

48.

1 12.8

67.1

28.4

Notes: (a) 1985 is the earliest year for which provincial data on rural nonfarm enterprises are available: (b) CV stands for coefficient of variation, which is the ratio of the standard deviation to the mean.

Sources: CSY1986,1989,1999, 2009; SCTE; CTEAPPY2009.

Table 1.9 Sectors with dominant SOE shares (%) in economic census years

Sector

2004

2008

2013

Assets

Sales

Assets

Sales

Assets

Sales

Industrial

Coal

89

69

75

53

63

(35)

Oil and natural gas

90

95

96

97

86

85

Metallurgy

9i

90

54

(40)

(44)

(32)

Tobacco

100

100

99

99

98

99

Power generation and distribution

73

79

77

74

70

65

Gas production and supply

77

83

53

(49)

(41)

(45)

Water production and supply

81

83

68

55

(46)

(47)

Nonindustrial

Air transport

84

100

82

96

76

98

Rail transport

~100

~100

~100

~100

~100

~100

Water transport

(46)

61

50

53

(43)

(43)

Warehousing and storage

>50

>50

>50

>50

76

94

Postal, telecom and IT services

54

75

>50

56

57

52

Banking

>50

>50

>50

>50

>50

>50

Notes: (a) Value-added data are unavailable, and sales data are used as proxies of (gross) output; (b) figures with “~” or “>” indicate approximate magnitude or range due to the lack of precise data; (c) figures in parentheses indicate drop of percentage below 50%.

Sources: CSY2005, 2009, 2014; CECY2004, 2008, 2013; FYC2006, 2015.

Relatively more SOEs survived the wave of massive privatization around the turn of the century, though their presence in the economy was also substantially reduced. When the SASAC was established in 2003 to consolidate control over the survivors, the state had retreated to a handful of strategically important sectors, as shown in table 1.9. Even there, the leading positions held by the remaining SOEs in some sectors after the tidal wave of privatization, such as coal, metallurgy, gas, water, and water transport, significantly eroded during the following decade. By 2013 the vast majority of industrial sectors,

Table 1.10 Number of industrial sectors with paid-in capital dominated by different owner groups, 2013

Dominant owner group (with 50+% share)

Two-digit sectors (n = 45)

Three-digit sectors (n = 200)

Four-digit sectors (n = 578)

Grouping I

State

4

7

18

Collective

0

0

0

Legal person/ institutional

2

20

64

Private

3

9

65

Foreign

1

13

53

Without dominant group

35

151

378

Grouping II

Public (state and collective combined)

4

10

21

Legal person/ institutional

2

20

64

Private and foreign combined

23

115

392

Without dominant group

16

55

101

Note: The data cover all industrial enterprises with annual sales of no less than 20 million yuan. Source: CECY2013.

especially those identified by four-digit classification, were dominated by private and foreign-invested companies, as suggested by the statistics on paid-in capital in table 1.10.[4]

The Growth and Organizational Patterns of FDI

Foreign investment is an important contributing force to privatization because the entry and expansion of foreign (private) capital not only dilute

Table 1.11 Selected statistics on the relative significance (%) of entities with FDI in the economy

Year

Industrial assets

Industrial sales

Nonfarm workforce

Industrial and commercial taxes

1994

11.7

13

8.5

1998

19.6

24.3

14.4

2004

24.6

30.8

11

20.8

2008

26

29.3

11.5

20.9

2014

20.7

22.8

(9.8)

20.9

Note: Figure in parenthesis is from the 2013 economic census.

Sources: CSY1995,1999, 2005, 2009, 2015; CECY2004, 2008,2013; SFDIC2015.

the significance of public ownership but, as I will discuss later, embody and stimulate institutional change. The re-entry of foreign direct investment began in 1979, when the government allowed joint ventures to be formed between public enterprises and foreign companies. From 1979 to 2014 China received a total of US$1.59 trillion of foreign direct investment (CSY 2015, table 11.13).[5] Table 1.11, based on limitedly available data, captures some facts about the important roles of foreign capital in the economy. It shows that FDI enlarged its presence, while public enterprises were in decline from the mid-1990s through the turn of the century. Its relative significance in the industrial sector and nonfarm employment may have peaked during the postprivatization years, when domestic private entities experienced faster growth. But its contribution to government revenue seems to have remained stable following massive privatization.

Spatially, FDI has concentrated in the coastal region, as shown in table 1.12. But it is important to note that over time FDI has spread both within the coastal region and among noncoastal provinces. In 1985 61% of the cities (inclusive of subordinate counties) in coastal provinces were recipients of FDI, whereas the percentage was only 26% for those in noncoastal

Table 1.12 Selected statistics on the geographic and sectoral distribution of FDI

Year

FDI utilized ($ billions)

Share (%) of coastal provinces in FDI utilized

% of cities with FDI in coastal provinces

% of cities with FDI in noncoastal provinces

% industrial sectors with FDI

% of manufacturing in registered foreign capital of FDI firms

All

Current year

1985

2.0

90.1

61

26

20

43.8

44.4

1995

37.5

»У"

oc

97

65

90.4

53.1

73.0

2004

60.6

86.6

97

85

96.2

63.1

65.2

2008

92.4

85.2

97

89

98.1

55.4

42.8

2014

119.6

82.1

100

90

(96)

44.5

24.6

Notes: (a) 1985 and 1995 were industrial census years, 2004, 2008, and 2013 were economic census years; 2014 was the year for which pertinent data are available from latest sources; (b) the percentages of industrial sectors with FDI for 1985 and 2014 are estimated using information on three-digit and four-digit industry classifications from the statistical summaries of the 1985 industrial census and the 2013 economic census respectively; the percentages for 1995, 2004, and 2008 are calculated directly from census data with four-digit industry classification.

Sources: CSY (various years); SSIC1985; SSIC199$; CECY2004, 2008, 2014; CCSY1985,1995, 2005, 201$; SICA; SFYCICA; data of the 1995 industrial census and the 2004 and 2008 economic censuses.

provinces. A decade later, these shares rose to 97% and 65% respectively, and the rise continued among noncoastal provinces during the next two decades. Interestingly, a substantial part of the spatial spread had already taken place before the massive privatization and China’s WTO accession after the turn of the century.

A similar pattern can be found in the sectoral characteristics of FDI, which only had a limited presence in the economy in the mid-1980s. By the mid-1990s, however, foreign capital had already propagated some 90% of the industrial sectors based on the four-digit classification. Table 1.12 further shows that from the mid-1980s through the turn of the century the distribution of FDI was increasingly skewed toward industrial activities, especially manufacturing. As will be shown later in the book, such a pattern was consistent with the fact that government economic policies (especially at local levels) focused on industrial development during that period of time. The trend gradually shifted during and after massive privatization, when the service sector rapidly overtook industries as the leading destination of FDI. China’s WTO accession in 2001 was a major catalyst, as it was followed by a lowering and removal of many barriers to foreign entry in service activities. Equally noteworthy, though, is the growing importance of urban development to the self-interest calculus of the gatekeepers and regulators of FDI—that is, local political actors—following the restructuring of fiscal relations in the mid- 1990s,[6] as will be detailed in chapter 3.

The geographic and sectoral expansion of FDI during the first decade of reform was largely achieved through forming joint ventures with public enterprises. That organizational pattern was subsequently redefined by three developments in the next two decades, which substantially reduced the significance of public ownership in the expanding foreign sector. First, wholly foreign-owned enterprise became the predominant organizational form of FDI. Second, private-foreign partnerships overtook public-foreign partnerships as the predominant group of organizations among joint ventures. Third, within the remaining public-foreign joint ventures the share of public ownership has been in decline. As can be seen in table 1.13, the shares of joint ventures in the total number of FDI entities declined over time relative to wholly foreign-owned enterprises, which are more “private” than joint ventures with public enterprises. Table 1.13 further shows concurrent declines in terms of investment and workforce shares. It also shows that among the FDI entities

Year

Share (%) of wholly foreign-owned enterprises (WFOE) in

Share (%) of private-foreign joint ventures ( JV) in total JV industrial workforce

Share (%) of public ownership in equity capital of industrial public- foreign JV

New

foreign-

funded

projects

Newly added FDI

Industrial FDI work-force

1979-82

3-5

7.2

1983

3.2

2.3

1984

i-4

3-8 (247)

1985

i.5

0.8 (110)

ii.3

1986

i.2

0.7 (i92)

i987

2.i

i2.7 (343)

1988

6.9

9.i (3ii)

i989

i6.i

29.5 (2i2)

1990

25.6

37 (i3i)

i99i

2i.5

30.6 (i04)

199[7] [8] [9] [10]

17.8

27 (ii0)

43.i

5.8

i993

22.7

27.3 (i04)

48.2

i994

27.4

26.6 (i40)

43.9

20.2

1995

3i.8

36.8 (98)

40.8

22.4

55.6

199[11]

36.9

36.6 (76)

i997

45.7

35.8 (66)

i998

48.9

36.2 (65)

39.5

64.3 (44.8)

i999

48.5

38.6 (57)

40.i

68.5 (48)

52.5

2000

54.6

47.3 (89)

4i.7

74.5 (52.i)

5i.4

2001

59.8

50.9 (52)

42.8

77.5 (56.6)

50.1

2002

64.9

60.2 (38)

42.8

82.2 (6i.i)

49.8

2003

65.9

62.4 (40)

44

87.1 (65.6)

49.2

2004

70.3

66.3 (33)

49.i

9i.3 (70.3)

52.2

2005

73

7i (33)

50.i

93.7 (7[7].7)

47.3

2006

72.7

73.4 (36)

5i.2

95.1 (74.l)

43.7

2007

78

76.6 (33)

52.7

95.3 (73.8)

36.i

2008

8i.4

78.3 (23)

64

organized as joint ventures there was steady growth in both the importance of joint ventures with domestic private owners and the significance of foreign shares in joint ventures with public enterprises.

  • [1] Pei’s estimate is for the secondary and tertiary sectors. If one treats the contribution from the primary (farming) sector (which amounted to 10.1% of GDP in 2012—see table 2.2 of CSY2013) as beingall from nonpublic entities, then the share of the nonpublic sector would come to about 70%.
  • [2] This 2% share is estimated by assuming that urban and rural collective enterprises had similar industry structures and capital-labor ratios in 2010, when rural collective enterprises contributed 0.7 of thecountry’s GDP (table 1.5) and had a workforce equivalent to about 60% of that of urban collectiveenterprises (CTEAPPY2011; CSY2011).
  • [3] According to China Statistical Yearbook 201s (table 4.2), the combined workforce in farming andnonfarming sectors totaled 772.5 million in 2014, which put the share of public sector employmentat 9.4%.
  • [4] Paid-in capital is investment in the shares of a company. It is the basic element of equity, which alsoincludes items like additional paid-in capital (e.g., IPO proceeds), accumulated earnings and profits, etc.
  • [5] Some of the FDI reported in official statistics may have been “recycled” or “round-trip” capital—funds moved (often through illicit channels) by Chinese individuals or companies to offshore locations (e.g., Hong Kong, the British Virgin Islands, and the Cayman Islands) and then reinjected intothe economy as “foreign” investment to take advantage of the tax breaks and other special regulatorytreatment offered by the Chinese government. The magnitude of such investment is unknown. Sincemuch of it is likely to be private or de facto private capital, it exerts a diluting effect on public ownershipsimilar to that of “genuine” FDI.
  • [6] The overwhelming majority of FDI entities are licensed by sub-provincial governments. I will discuss this in chapter 6.
  • [7] Notes: (a) Figures in parentheses of the third column are coefficient of variation for weighted average
  • [8] among provincial units (including centrally administered municipalities); (b) figures in parentheses of
  • [9] the fifth column are derived by classifying all joint ventures between institutional owners and foreigninvestors as public-foreign joint ventures.
  • [10] Sources: CSY-2008 (various tables); CFES; CEESY (various years); data of NBS annual industrial
  • [11] surveys (1992-2008).
  • [12] Notes: (a) Figures in parentheses of the third column are coefficient of variation for weighted average
 
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