Published on: 2014-09-27
China’s private businesses account for most of the growth of output and all of the growth of employment since 1978, and more recently most of the incremental growth of exports as well. Lardy debunks the common views that China’s private sector has had little or no access to credit from the banking system and that China resents a model of state capitalism. Indeed, to the contrary, China’s highly publicized attempt during the Hu-Wen era to create so-called national champions via SASAC and various industrial policies has failed. The return on assets of the universe of SOEs under SASAC has plummeted since 2007 and is now less than half of any reasonable estimate of their cost of capital. While private businesses have largely displaced state firms in industry, the role of the private sector has been limited in services, where there are still substantial barriers to entry and inefficient state firms continue to dominate in the key modern business services. China’s way forward is to follow through on the Third Plenum decision to increase the role of the market in the allocation of resources and allow entry of private service firms.
About the Speaker
Nicholas R. Lardy is the Anthony M. Solomon Senior Fellow at the Peterson Institute for International Economics. He joined the Institute in March 2003 from the Brookings Institution, where he was a senior fellow from 1995 until 2003. Before Brookings, he served at the University of Washington, where he was the director of the Henry M. Jackson School of International Studies from 1991 to 1995. From 1997 through the spring of 2000, he was also the Frederick Frank Adjunct Professor of International Trade and Finance at the Yale University School of Management. He is an expert on the Chinese economy.
Lardy is a member of the Council on Foreign Relations and of the editorial boards of Asia Policy and the China Review. He received his BA from the University of Wisconsin in 1968 and his PhD from the University of Michigan in 1975, both in economics.
[Review] Book Review Roundtable: Nicolas R. Lardy’s Markets over Mao: The Rise of Private Business in China with comments from IEMS’ Kellee Tsai
[Bio] Kellee Tsai