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China Briefings

Reports on China issued by Samsung Economic Research Institute

China's Monopolistic Industries Face Reforms

China's Monopolistic Industries Face Reforms

Samsung Economic Research Institute Beijing Office

Sept. 29, 2006

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China's monopolistic industrial structure is the unique product of its socialist planned economy. China's market reform policy has centered on developing existing large-scale state-owned companies as "national champions" and privatizing small-scale state-owned companies. Under the policy initiative, small-scale state-owned corporations have faced considerable competitive pressure, while large-scale state-owned corporations have received government protection and assistance. China's monopolistic industries include power utilities, banking, tobacco, petrochemical, and telecommunications.

Typically, the Herfindahl index and Bain's measure are used to measure degree of market concentration. Employing the Herfindahl index, the Chinese industries under examination illustrate abnormally high levels of market concentration. If local protectionism resulting from local government intervention is taken into account, the degree of monopoly in some of China's industries would be higher than generally perceived.

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