Market power of China's State-owned Firms: Evidence from Manufacturing Firm-level Data

Discussion Papers

No.779

by Yoshihiro Hashiguchi

March 2020

ABSTRACT

There has been a great discussion about a phenomenon: Guojin Mintui (i.e., the state advances, the private sector retreats) since the latter half of the 2000s. Has the state-owned sector been expanding and undermining private enterprises? To address this issue, this paper estimates changes in markups of China's state-owned firms from 2003 to 2007, using manufacturing firm-level data. It is found that the relative markup of the state sector is smaller than those of the private and foreign sectors, while it tends to steadily increase and be catching up with the private and foreign sector during 2004--2007; However, the catching up process is not observed in surviving firms. This implies that the exit of the state-owned firms with lower markups causes the increase in the average markups of the state sector. In terms of the relative markups in the manufacturing sector for 2003 to 2007, this study does not support the argument of Guojin Mintui.

Keywords: Markups, China's state-owned firms, Manufacturing firm-level data

JEL classification: D22, D24, L11, P21

Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.