After Xi Jinping came to power in late 2012, China’s financial system underwent significant reforms that centralised financial regulation while also creating new channels of finance for China’s industrial sectors, fundamentally changing how China’s economy is funded. At the forefront of these changes was the emergence of an army of state investment vehicles that were summoned to distribute resources according to state goals. These state-owned investment arms are the State Capital Investment and Operation companies (guoyou ziben touzi yunying gongsi 國有資本投資運營公司, hereafter SCIOs). Until only a decade ago, SCIOs were firmly traditional industrial state-owned enterprises, their business activities largely confined to their particular industrial sector. This state-led innovation raises important questions about the extent to which states can structure markets to serve their policy objectives, particularly under conditions of resource scarcity and weak financial institutions.
Empirically ex...
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