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China Facts: Privatization in reverse

 

 

The success of the private sector in China is undisputed. The non-state sector contributes close to two-thirds of China's GDP growth and eight-tenths of all new jobs. SOEs' return on assets is half that of privately held ones. A different storyline is now unfolding. Between January and October profits at SOEs' grew by 17% compared with the same ten months last year; those at private companies fell by 19%. Soon after Xi Jinping came to power in 2012, a plan known as "mixed-ownership reform" was introduced allowing private companies to buy stakes in the state sector. That scheme is now working in reverse. At least 29 listed firms on the Shanghai and Shenzhen stock exchanges have sold controlling interests to the state this year and  over half of all deals in which a controlling stake was sold this year were nationalisations. Just 8% were privatisations. Such deals do not necessarily mean a firm is put to the service of the state. Many state investors simply want a tidy return. *)

 

*) The Economist 8th December 2018

 

 

 

 

 

 

 

 

 

 

 

 

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Hans Henrik Pontoppidan
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