China’s state vs. private company tracker: Which sector dominates?

The share of China’s state sector among the country’s 100 largest listed companies, measured by aggregate market capitalization, continued to advance through mid-2023, rising from 57.2 percent in end-2022 to 61.0 percent in the first half of 2023. Companies that are majority-owned by the Chinese state accounted for nearly all of this increase. The share of the private sector, defined restrictively as firms with less than 10 percent state ownership, in the first half of 2023 dropped below 40 percent for the first time since end-2019. The private-sector share was only 8 percent at end-2010 and had reached a peak of 55.4 percent in mid-2021.

In other words, recent six-month measures of the expanding state sector contrast with the advance of the private sector during the decade preceding mid-2021. Importantly, this PIIE tracker, based on the methodology in the authors’ 2022 Working Paper, is an indication of market sentiment, not of real economic performance, and of relative shares not absolute levels of market value. It echoes, however, other dismal recent private-sector numbers. For example, China’s private-sector fixed asset investment growth was negative (minus 0.2 percent) in the first half of 2023 compared with the first half of 2022, the worst since late 2020, while state-sector investment expanded 8.1 percent.

In the definition used here, the state sector includes both mixed-ownership enterprises (MOEs) and state-owned enterprises (SOEs) shown in the chart. Still, MOEs and SOEs are worth tracking separately because state and party control is generally less direct and complete in the former than in the latter.

This PIIE tracker informs on the trend in the dynamism of China’s private sector beyond the rhetoric in China and the United States. It focuses on the respective shares of state-sector and private-sector firms among China’s largest companies and thus provides a half-yearly market-based indicator of the private-state balance in Chinese business. The continuous decline of the private-sector share among China’s largest companies over four semesters in a row through mid-2023 does not support optimism about the future dynamism of China’s economy.