Reform of state-owned enterprises and productivity growth in China

Using firm-level data from a Chinese industrial survey covering 1999 to 2007, the paper analyses the impact of state-owned enterprise (SOE) reforms on productivity growth in manufacturing. The results indicate that: (1) aggregate productivity of manufacturing increased rapidly, with an average annual growth rate of 10.6 per cent. Although the aggregate productivity of SOEs was lower than in other types of enterprises, their growth rate was the fastest. (2) The productivity growth due to SOE reform was mainly contributed by the improvements in resource allocation, rather than the growth of firm productivity. (3) The between-firm effect and the impact of new firms contributed most to the total productivity growth, while the contribution from the exiting of firms was relatively small.