China’s state-owned enterprises are putting pressure on the country’s previously dynamic private sector, reports Nikkei Asia. The combined market capitalization of big private companies has fallen by about 60% in the two and a half years to the end of 2023, a study by a US think tank has found. Many market watchers believe China’s tightening of controls, such as the zero-COVID policy and the clampdown on the tech industry, is responsible for the slump in the private sector.
The Peterson Institute for International Economics analyzed the market capitalization of China’s top 100 companies. It found that the share of total market capitalization held by state-controlled enterprises, in which the government holds a stake of 50% or more, rose to 50% by the end of 2023, the highest proportion in five years. State-owned companies accounted for 31% of total market cap among the top 100 companies in June 2021, when private Chinese companies, led by tech juggernauts like Alibaba Group Holding and Tencent Holdings, were growing.
In contrast, the share of total market value held by private enterprises, defined as those less than 10% owned by the state, declined, dropping below that of state-owned companies at the end of 2022. By the end of last year, private companies’ share of total market cap was 37%. The combined market value of private companies, which peaked at $4.745 trillion, had fallen to less than $2 trillion by the end of 2023.