Faculty of Business Administration
Business Economics
A Model of China’s State Capitalism
Dr. Wang Yong
Assistant Professor
Department of Economics
Hong Kong University of Science and Technology

This paper documents a hallmark feature of China’s state capitalism as the state controlling the economy in a vertical structure: State-owned enterprises (SOEs) monopolize key industries in the upstream, whereas the downstream industries are largely open to private competition. We develop a general equilibrium model to show that the vertical structure, when combined with openness and labor abundance, is critical in explaining the puzzling fact that the profitability of China’s SOEs exceeded non-SOEs in the past decade while the opposite was true in the 1990s. We show how the upstream SOEs extract rents from the liberalized downstream industries in the process of industrialization and globalization. The unprecedented prosperity of SOEs is shown to be a symptom of the incompleteness of market-oriented gradual reforms. Emergence, sustainability, and general implications for other countries of this state capitalism are also discussed.

Date: December 17, 2014 (Wednesday)

Time: 14:00~15:30

Venue: Faculty of Business Administration, E22-3011

A Short Biography of Prof. Gao
Dr. Wang serves as Assistant Professor, Department of Economics, Hong Kong University of Science and Technology. His’s research interests include Economic Growth, Macro Development/Trade, Political Economy, China and India Economies. He got his Ph.D. in Economics from the University of Chicago; M.A. in Economics from Peking University, China and B.A. in International Economics from Fudan University, China.