Capital Market Development: China and Asia Seminar Series – Ownership Networks and Firm Growth: What Do Forty Million Companies Tell Us About the Chinese Economy?

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The finance–growth nexus has been a central question in understanding the unprecedented success of the Chinese economy. Using unique data on all the registered firms in China, the authors build extensive firm-to-firm equity ownership networks. Entering a network and increasing network centrality leads to higher firm growth, and the effect of global centralities strengthens over time. The RMB 4 trillion stimulus launched by the Chinese government in 2008 partially “crowded out” the positive network effects. Equity ownership networks and bank credit tend to act as substitutes for state-owned enterprises, but as complements for private firms in promoting growth.

About the Seminar Series

Financial market development goes hand-in-hand with economic growth. The development of China’s capital markets in terms of size, regulations, capability, and efficiency has been impressive. China may now even lead globally in some dimensions, notably e-payments systems. Yet, China’s capital markets are still a work-in-progress facing both generic and unique challenges. Other Asian capital markets have even greater uneven development. Some in advanced Asian economies have acquired globally acclaimed reputation and capabilities while various regulatory and structural weaknesses dwarf others. Corporations and investors have been inclined to arbitrage cross-border regulatory and developmental gaps; so the very uneven status of capital markets across Asia is a policy issue for the governments in the entire region and perhaps globally. Analyzing the positive and negative lessons in the functioning of Asia’s capital markets, and identifying reforms and applications of technology that could further improve Asian capital markets’ allocation efficiency, financial inclusion, and forewarning against reforms that might cause problems can benefit practitioners, policymakers and researchers, and can contribute significantly to overall prosperity.

The ABFER and the University of Chicago’s Becker Friedman Institute China (BFI-China), in collaboration with National University of Singapore (NUS) Business School, Shanghai Advanced Institute of Finance (SAIF), The Chinese University of Hong Kong (CUHK) Department of Economics, CUHK-Shenzhen and Tsinghua University PBC School of Finance (Tsinghua PBCSF), hope to provide a virtual network to benefit researchers, policymakers, and practitioners from Asia and beyond.