Business Environment and Dual-Track Private Sector Development : China's Experience in Two Crucial Decades
A void in the literature on the business environment is how it evolves over time. Focusing on China during its crucial two decades of transition (from the early 1990s to the early 2010s), this paper documents how the country's business environ...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/327401582639640799/Business-Environment-and-Dual-Track-Private-Sector-Development-Chinas-Experience-in-Two-Crucial-Decades http://hdl.handle.net/10986/33393 |
| Summary: | A void in the literature on the business
environment is how it evolves over time. Focusing on China
during its crucial two decades of transition (from the early
1990s to the early 2010s), this paper documents how the
country's business environment and the characteristics
of entrepreneurs evolved, along with the role played by
local governments. Relying on multiple comprehensive data
sets, the paper shows that many aspects of local business
environments improved: infrastructure, development of the
court system, and access to external finance. Meanwhile, the
share of politically connected private firms remained large,
and their advantage in accessing key resources increased.
Under this dual-track private sector development, private
firms became larger and more innovative and adopted more
formal corporate governance mechanisms. Entrepreneurs became
much better educated, with more diverse sectoral experience.
Market competition increased over time, especially after
China's World Trade Organization entry. The paper
offers suggestive evidence that this dual track development
had negative consequences, such as a lower tendency to
innovate by politically connected firms. |
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