Why Are China’s State-Owned Enterprises so Profitable? A Financial Repression Perspective

  • Guangdong XuEmail author
  • Binwei Gui
Part of the China-EU Law Series book series (CELS, volume 2)


The profitability of China’s SOEs has increased in an impressive manner in recent years, despite the inefficiency inherent in their corporate governance structure. However, there is evidence that such profits come mainly from distorted economic policies (such as financial repression) that favour SOEs at the cost of development of private enterprises and social welfare, rather than from certain reform strategies adopted by the Chinese government to improve the performance of SOEs, such as corporatization, reorganisation, and market openness. In this chapter, we empirically examine and confirm the connections between financial repression and the profitability of China’s SOE. Therefore, it is safe to argue that without the financial rents created by the distorted financial policies, it is difficult or impossible for China’s SOEs to survive, not to mention develop or profit.


China Financial repression Financial rents SOEs 


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© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  1. 1.Center for Law and Economics at the China University of Political Science and LawBeijingChina

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