TY  - JOUR
AU  - Dollar,David
AU  - Wei,Shang-Jin
TI  - Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13103
PY  - 2007
Y2  - May 2007
UR  - http://www.nber.org/papers/w13103
L1  - http://www.nber.org/papers/w13103.pdf
N1  - Author contact info:
David Dollar
US Treasury
E-Mail: David.Dollar@do.treas.gov

Shang-Jin Wei
Graduate School of Business
Columbia University
Uris Hall 619
3022 Broadway
New York, NY 10027-6902
Tel: 212/854-9139
E-Mail: shangjin.wei@columbia.edu
AB  - Based on a survey that we designed and that covers a stratified random sample of 12,400 firms in 120 cities in China with firm-level accounting information for 2002-2004, this paper examines the presence of systematic distortions in capital allocation that result in uneven marginal returns to capital across firm ownership, regions, and sectors. It provides a systematic comparison of investment efficiency among wholly and partially state-owned, wholly and partially foreign-owned, and domestic privately owned firms, conditioning on their sector, location, and size characteristics. It finds that even after a quarter-of-century of reforms, state-owned firms still have significantly lower returns to capital, on average, than domestic private or foreign-owned firms. Similarly, certain regions and sectors have consistently lower returns to capital than other regions and sectors. By our calculation, if China succeeds in allocating its capital more efficiently, it could reduce its capital stock by 8 percent without sacrificing its economic growth (and hence could raise its household consumption and deliver a faster improvement to its citizens' living standard).
ER  -