However, this ‘soft’ commitment was not honoured. In late 2018, China suddenly sent a notification to the WTO for all the missing prior years (Hu, 2019; WTO, 2019b). However, it seems that these notifications were incomplete, as found in the latest WTO Trade Policy Review (WTO, 2019a). In principle, the United States and Europe could offset the advantages that these more or less hidden subsidies give Chinese exporters by introducing countervailing duties. In practice, this is difficult because the opaque nature of the subsidies makes it difficult to prove their impact in specific cases.
capital markets behind them. Private Chinese enterprises ought to be equally, or perhaps even more, disadvantaged by SOEs having preferential access to capital.
The role of SOEs in the Chinese economy is difficult to document in detail, but most statistics suggest it remains important, albeit having fallen somewhat over the last two decades. For example, SOEs still account tor about half of the capital stock of industrial enterprises (down from three-quarters). Moreover, SOEs tend to be large. A number of them, especially the large state-owned banks, now rank among the largest global companies.
But these examples are not representative of the entire sector. SOEs remain an important factor in the Chinese economy, but their importance has declined considerably over the last decade and more recently. For example, SOEs now account for only about one-quarter of (urban) employment and a similar share of profits (and only one-tenth of exports, as mentioned above). Foreign-controlled enterprises make more profits (31% of the total), while the share of profits going to private Chinese enterprises is even higher.
Chinese statistics show that foreign-invested enterprises generally achieve much higher profitability than state-owned ones and that the profitability of foreign-invested enterprises has persisted, not fallen, over time, although it remains slightly lower than that of private Chinese ones. There is thus evidence that, while SOEs are not efficient in their investment, they play only a small role in exports, and their continuing role has not impeded continuing high profitability of foreign investment in China. Some observers have detected a revival of the role of SOEs more recently, but the evidence for this is still tentative.