Do we have clear benchmarks for comparing the relevance and performance between the SOEs and private companies? The report just released by the All-China Federation of Commerce and Industry (ACFCI) sheds more light on the role of the private companies. Apparently the 500 biggest of those create more value than the State-Owned Enterprises (SOEs). The outcome can be seen in two ways.
On one hand it confirms the vitality of the private entrepreneurships. Numbers are crude and real: private companies create more value, pay more taxes, hire more workers and register more patents than SOEs. It is a simple confirmation of a trend. We are witnessing a transfer of economic might from one sector to another. Private companies are by nature more dynamic and able to grab market opportunities. State entities are known to be slower in decision making and more related to social constraints.
On the other hand, the study misses the opportunity to better describe its assumptions. Results look unproved because definitions are unclear. What is the exact difference among private, collective and state ownership? Some enterprises even have mixed ownership. Regardless of their nature, private running is conducted with respect to market conditions. Others are owned not by the state but by local governments. SOEs are big groups, but only 169 of those report to Beijing, i.e. the very powerful SASAC (State-Owned Assets Supervision and Administration Commission of the State Council). The rest of SOEs are owned locally, by provinces, municipalities or counties.
To which enterprises does the ACFCI report refer? Also, contribution to GDP should be better defined. Report states 50% of GDP comes from private companies, but other sources fix it at any value between 20 and 75%. Finally, does GDP mean the entire added value created by the whole country or just the industrial output? It is obvious that the contribution of SOEs is bigger in the primary and service sectors, so statistics may have different values.
Overall, the report poses no surprise. Even if news is outstanding, China made us used to them. What is missed here is the chance to diffuse more clarity, to fade away the opacity and allow a more scientific approach.