Toward State Capitalism in China?

Abstract

We study empirically credit availability of listed firms in China for the years 2003-11 to uncover underlying trends in economic policies. The estimations indicate increasing favoritism of state-owned firms in credit availability, consistent with a drive toward "state capitalism." Initially, favoritism applied mainly to firms owned by the central government, but the difference between central and local government firms gradually diminished to insignificance. These results signal that economic policies pushed the Chinese economy from the path toward a market economy and state capitalism, and that the economic importance of local governments was growing.

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