The Scope of China’s State-Owned Enterprises

In my last post I mentioned China’s need to start divesting its state-owned enterprises. Just how big a problem is that for China? This big:

Hat tip: Fortune

Bloomberg remarks:

The impact of the SOEs on private enterprise is getting more damaging as the economy’s growth slows. “Many of China’s structural distortions, both economic and otherwise, are due to the dominating positions of the SOEs,” says Chen Zhiwu, a finance professor at Yale University and an adviser to China’s cabinet in 2007. State enterprises have “made competition unfair and the legal system biased against private firms and individuals.” The 150,000 SOEs account for 17 percent of urban employment, 22 percent of industrial income, and 38 percent of China’s industrial assets, according to JPMorgan Chase. With $16 trillion in assets, the SOEs do everything from building spacecraft to trading silk. These enterprises, says BNP Paribas, are also big borrowers. BNP figures corporate debt, mostly owed by SOEs, rose to 167 percent of gross domestic product in 2014, from 97 percent in 2008. The state sector stands in the way of China’s transformation into an economy driven by services and consumption.

or, in other words, a major problem China has in transforming its economy from one dependent for growth on exports and, more specifically, exports of low margin goods to one that relies more on internal demand for goods and services is its state-owned enterprises.