Capitalism with Chinese Characteristics: Entrepreneurship and the State

by Yasheng Huang

In fact, the data on aggregate size obscure the extent to which indigenous private-sector firms are undersized. This is because there are far more indigenous private-sector firms than there are FIEs. Let me illustrate this point using the OECD definition. The 5.9 percent share of indigenous private-sector firms in 1998 was spread among 19,322 firms, whereas the 11.7 percent share of FIEs was produced by 15,934 FIEs. The aggregate size of the indigenous private-sector firms is less than half the size of the foreign private-sector firms, and their individual sizes are even smaller. Even the latest data for 2005 show a larger foreign sector – at 28.8 percent – than the indigenous private sector at 22 percent.