by AW
John Lee, author of Will China Fail? writes in his article Is China Really An East Asian Success Story
McKinsey & Co suggested that the average Total Factor Productivity of large state-owned and state-controlled industrial firms was half that of privately owned firms. Bear in mind that the 152 centrally managed state-owned-enterprises or SOEs are the most efficient of the state-owned and state-controlled entities. Even then, 80% of profits from all centrally managed SOEs come from fewer than a dozen firms such as China Mobile, Sinopec, and China National Petroleum Corporation—all operating in virtual monopoly environments.
In other words, the vast majority of even the centrally managed SOEs, despite easy credit and protected environments, are poor performers. Most of the approximately 120,000 provincial state-owned or state-controlled enterprises and collectives perform even worse. To put the situation in perspective, China’s overall use of capital is twice as inefficient as India’s when measured in terms of capital inputs used to produce additional output.
The absolute size of China means that even if its economy falters, China will continue to be a major presence in the region. However, given the weaknesses in its economic strategy and civil society, we need to consider the possibility that China is becoming more like an unbalanced South American giant such as Brazil than an East Asian success story such as Taiwan and South Korea.
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