ABSTRACT
This chapter examines the effects of the allocation of resources among the enterprises of different types of ownership, along with other factors, on economic growth. Based on the theory of endogenous economic growth, allocation of resources between public sector and private sector matters for economic growth. The state enterprises are affiliated with various levels of government, such as central government, provincial government, city government, and county government. Managers act according to the commands of supervisory bureaucracies in the government. Two key problems have plagued the state enterprises, the lack of incentives for the managers and workers and unsuccessful planning by the planning authorities. Evidence from thirty Chinese provinces indicates that the investment share of private enterprises is positively related to the growth rate of per capita real gross domestic product (GDP). The rapid expansion of non-state enterprises, particularly private enterprises, greatly changed industrial output composition by ownership.
