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One State, Many Regions: China's Fragmented Industrial Takeover

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  • Myrto Kalouptsidi

    (Princeton University)

Abstract

In recent years, Chinese firms have rapidly dominated a number of capital intensive industries (steel, solar panels, shipbuilding) in world markets. At the same time, China's domestic industries are fragmented: on one hand, there is substantial regional industrial duplication due to China's decentralized bureaucracy; on the other hand, even within provinces, these industries tend to be characterized by a large number of small firms. In this paper, we study the role that industrial policy has played in China's (fragmented) industrial takeover. We first document and measure the support provided by Chinese provincial governments. We then ask what their impact is on global (mis)allocation and welfare. We explore the unintended consequences of provincial competition driven by non-market based policy instruments, such as excess capital expansion. Finally, we study the consequences of consolidation policies brought forward by the central government.

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  • Myrto Kalouptsidi, 2015. "One State, Many Regions: China's Fragmented Industrial Takeover," 2015 Meeting Papers 1247, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:1247
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    References listed on IDEAS

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