How State-owned Enterprises Drag on Economic Growth by Ruiming Liu

Author:Ruiming Liu
Language: eng
Format: epub
ISBN: 9783662591888
Publisher: Springer Berlin Heidelberg

Proposition 3.4

Financial leakage and private lending help relieving the negative effects caused by financial repression and ownership discrimination. A larger amount of financial leakage means a larger scale of private lending and more total social output.

All the propositions above have clear implications. Financial repression and ownership discrimination increases the monopoly profit of state-owned banks and maintain the survival of SOEs, while damaging the financing ability and output of enterprises, impeding the development of private enterprises, therefore lowering the total social output and net losses of social welfare. With a distorted system like this, seemingly-improper methods like financial leakage and private lending adjusted the negative effect on efficiency by another form of distortion.

Based on the analysis above, we raise two verifiable hypotheses:

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