Should State Capital Withdraw from Competitive Sectors?

5月 19, 2017

Xie Lijua（n 谢莉娟）and Wang Shixu（n 王诗桪）

School of Business, Renmin University of China, Beijing, China

Abstract: That SOEs are inefficient is still a consensus in most economic literature.

However, in recent studies, more and more arguments are made in favor of the efﬁciency

of SOEs, yet existing empirical studies are mostly based on production industry data as

samples. On the basis of adopting distribution samples and conducting a cross-sector

comparison between the production industry and the distribution sector, this paper offers

a multi-perspective empirical assessment on the efﬁciency of SOEs. Through the analysis

of major financial indicators and adopting the Data Envelopment Analysis-Malmquist

index for total factor productivity comparison, we ﬁnd that SOEs generally do not have

any disadvantage in efﬁciency and their superior efﬁciency is particularly pronounced in

the distribution sector as compared with production industry. Moreover, the high share and

high efﬁciency of state capital in the wholesale sector needs particular attention. This paper

employs case studies to reveal the positive correlation between the assets-heavy operation

of state-owned wholesale firms and their profitability. The implications are as follows:

policymakers must deliberate prudently before deciding to withdraw or increase state

capital in various sectors; in the wholesale sector where state capital is more efﬁcient, the

functions of state capital can be bolstered by increasing its presence in the sector; the notion

that state capital must be withdrawn from competitive sectors cannot be adopted likely, nor

should the beneﬁts of asset-light operation be exaggerated.

Keywords: state-owned wholesale sector, TFP, efﬁciency mechanism, DEA-Malmquist index,

multi-case study analysis

JEL Classiﬁcation: D24, D30, L81