Growth of private and state-owned listed businesses in China : The effects of finance and ownership structure on performance and potential

Gao, Zhan and Atherton, Andrew (2025) Growth of private and state-owned listed businesses in China : The effects of finance and ownership structure on performance and potential. International Journal of Entrepreneurial Behavior & Research. ISSN 1355-2554 (In Press)

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Abstract

Purpose. This study analyses the growth patterns of listed Chinese companies in China during the 2000s and 2010s. Two key questions are considered: firstly, does finance affect firm growth in China? And, secondly, do private enterprise grow more quickly than state-owned enterprises. Design/Methodology/Approach. A multi-year longitudinal approach is taken in order to provide a time-sensitive analysis of growth. Financial data were obtained from Compustat Global. The sample includes publicly listed nonfinancial companies in China’s two domestic stock exchanges - Shenzhen and Shanghai - between 1999 and 2022. Hypotheses were developed in order to test whether finance affects growth and also to determine whether private enterprises, which tend to be smaller and younger, grew faster than state-owned enterprises, which tend to be larger and older. Findings. Growth was positively affected by investment opportunities, and constrained by debt, supporting the view that financing continues to be a critical factor in China. In the 2000s, companies at both ends of the size spectrum, namely the smallest and largest, outgrew companies in the middle. In the 2010s, smaller, younger companies continued to grow rapidly, while larger, mature companies significantly slowed down in terms of growth. Given the former are more likely to be private than state-owned enterprises (SOEs), this indicates that Chinese private enterprises have retained their vitality, despite ongoing constraints to their finance. SOEs continued to grow, but at a slower rate, indicating China’s economy is shifting to a more dynamic and entrepreneurial private sector alongside an established, but slower-growing, state sector. Claims that the state sector is pushing out private enterprises are not supported. Originality. The longitudinal use of financial and firm data over more than two decades provides a long-term perspective on firm growth in China. Studies taking a longer-term time-based consideration of firm growth and changing patterns are rare in the literature, but important for China due to continued economic growth and restructuring. The paper confirms ongoing issues around financing of growth firms and evidence that an entrepreneurial private sector has outgrown the state sector especially since 2011. Practical Implications. China is becoming more of a private economy, and the mixed models proposed by the Chinese government are becoming less representative of the country’s economic structure. As a consequence, future growth in China will increasingly be driven by private enterprises. State-owned, even where they dominate certain sectors, will contribute less to economic growth and activity.