chapter  6
25 Pages

An exploration of pyramidal business groups in China: Dylan Sutherland, Lutao Ning and Jing Wang

ByDYLAN SUTHERLAND, LUTAO NING, JING WANG

Introduction Business groups, as opposed to free-standing firms, have played prominent roles in the economic development of many developing economies. This is particularly true for the economies of East Asia and especially so for China today.1 By the end of 2008 there were 2,971 officially recognized business groups in China with 30,164 first-tier majority owned subsidiaries, employing around 33 million people directly (SSB 2009).2 Beneath this first-tier, moreover, many further tiers of participating firms existed within further subsidiaries and associated firms. Indeed, the full extent of group membership in China is still unknown but it is likely to be very large. As such, the influence and reach of China’s business groups is very important, and their role in the Chinese economy going forward is only likely to become more so. Yet, despite this, academic research on Chinese groups is still in its infancy. Very few studies, moreover, have directly investigated the question of whether pyramidal structures are forming in Chinese groups, though many look at more general business group related questions (Morck and Nakamura 2007; Morck et al. 2005; Yiu et al. 2005; Keister 2000).