Economics of Transition Institutional Change, 2023, Volume31, Issue 3

Authors: Wei Luo, Yue Lu, Huimin Shi

Abstract: Compared with privately owned enterprises (POEs), Chinese state-owned enterprises (SOEs) are 6 percent more likely to export, although SOE productivity and external financial ability are 0.9 percent and 20% lower, respectively. To account for SOEs' higher export propensity, we build a model of firms' export decisions, embodying productivity, internal and external financing ability, and two aspects of China's institutional background: invisible subsidies to SOEs and preferential lending. We apply the model to firms from the Chinese Industrial Enterprise Survey Data, from 2003 to 2007, and find that SOEs' advantages in receiving invisible subsidies and more bank loans can significantly explain their higher export propensity.

Key Words: China's exports; invisible subsidy; preferential lending; privately owned enterprises; state-owned enterprises