Nicolas Véron

Op-ed on CNN.com: Fully reimbursing SVB depositors may prove to be a bad move

CNN.com today published this op-ed in which I express doubts about the wisdom of the unlimited guarantee of uninsured deposits, which the US authorities have applied to Silicon Valley Bank and Signature Bank with the consequence that the same will be expected in most or perhaps all future cases. While it is clear that the authorities needed to provide generous liquidity assistance this week, I am among those unconvinced that it was necessary to depart from the time-tested principle of limited deposit insurance, which I view as a regime change for US finance. 

Will China's impending overhaul of its financial regulatory system make a difference?

In a new Policy Brief published today by the Peterson Institute, Martin Chorzempa and I analyzes challenges and international points of comparison for China's ongoing reform of its financial supervisory architecture. A version of the same argument is forthcoming at Bruegel. 

Much of the Global South is on Ukraine's side

This blog post was published yesterday by the Peterson Institute. 

Update (March 15): the post was also published by Bruegel. 

Efforts by the United States, Europe, Japan, South Korea, and other developed economies to rally the world against Russia over its invasion of Ukraine have been only partially successful. Many countries have declined to impose sanctions on Russia. But the record of votes at the United Nations indicates that most of the world, including much if not most of the developing world, is on Ukraine's side in denouncing Russia.

That record stands in contrast to some recent commentary implying that the "Global South" has adopted a position of neutrality in the conflict. That is indeed the case of China and India, the Global South's two economic and demographic heavyweights. But votes at the United Nations General Assembly (UNGA), which adopted a resolution in February demanding an end to the war and an immediate Russian withdrawal, indicate that the rest of the Global South actually leans towards supporting Ukraine.

For simplicity, the "Global South" is defined here on a criterion of gross domestic product (GDP) per capita, using GDP at market exchange rates estimated by the World Bank.[1] All countries with 2021 GDP per capita above US$15,000 are considered part of the "Global North," with the addition of Bulgaria and Romania (GDP per capita $12,221 and $14,858, respectively) as members of the European Union. Under that definition, both Russia and Ukraine are in the Global South, as are China and India. Conversely, some geographically southern countries such as Chile and Uruguay are classified as part of the Global North under this GDP per capita criterion. Thus defined, the Global South represents 85 percent of the world's population and nearly 39 percent of global GDP.

Each country's position on the Russia-Ukraine war is determined on the basis of its UNGA vote on February 23, 2023, whose outcome was broadly similar to those of earlier UNGA votes on Ukraine in 2022. While specific motivations may vary, it is natural to classify votes in favor of the resolution, which demanded that Russia "immediately, completely and unconditionally withdraw all of its military forces from the territory of Ukraine," as favorable to Ukraine, and those against it as favorable to Russia. The other two options, namely abstentions and no-shows, are bundled together as signaling neutrality.

The resulting picture is one of unanimity of the Global North: Its 57 countries all approved the resolution. By contrast, the 136 countries of the Global South embraced a range of positions, with China and India both being neutral, as illustrated by figure 1.

The pro-Ukraine camp represents almost two-thirds of the Global South's countries, and more than a third of its population. In terms of GDP, neutral China dominates the Global South with nearly half of the total (49 percent), but the pro-Ukraine camp, which includes large countries such as Brazil, Indonesia, Mexico, Nigeria, and the Philippines, makes up more than half of the rest (28 percent).

All things equal, a country's support for Ukraine is somewhat correlated with its wealth. But here too, the reality is nuanced. This is illustrated in figure 2, based on the ranking of all UN countries (including those in the Global North) by GDP per capita. All countries in the fourth (richest) quartile voted in favor of the UNGA resolution. But a majority did so in the other three quartiles as well, albeit only by a tiny margin in the first (poorest) quartile. Because of the outsized impact of the world's two most populated countries, both neutral, the share of the pro-Ukraine vote is actually higher in the first quartile than in either the second (which includes India) or the third quartile (which includes China) in terms of both population and GDP.

There is no question that the comparatively rich countries of North America, Europe, and East Asia are more engaged on the side of Ukraine than most of their peers in the Global South, even among those that supported Ukraine at the UNGA, as a recent opinion poll has documented. Strikingly, financial sanctions have been imposed on Russia by all ten richest jurisdictions of the Group of Twenty (G20), and by none of the ten poorer G20 countries. Even so, it would be inaccurate to play down the significant level of support that Ukraine keeps receiving from many of the world's less affluent countries.

Note

1. Source: World Bank, World Development Indicators, last updated December 22, 2022. For countries with nonsovereign dependencies that are reported separately by the World Bank (e.g., China with Hong Kong, the United States with Puerto Rico, Denmark with Greenland), and to the extent data were available, these dependencies are included in the GDP and population numbers. That leaves out jurisdictions without UN representation, such as Taiwan (absent from the World Bank dataset), Kosovo, the West Bank, and Gaza. All population numbers are as of 2021; GDP is as of 2021 for most countries, and 2020 for a few late reporters. In five cases (Eritrea, North Korea, South Sudan, Venezuela, and Yemen), UN estimates have been inserted as the World Bank does not provide recent data.

Financial Statements: A post-mortem of the Danske Bank fraud

In yesterday's session, I hosted Jesper Berg of the Danish Financial Supervisory Authority and David Enrich of the New York Times to discuss the lessons from the landmark settlement of Danske Bank following large-scale financial malpractice at its Estonian branch in the early 2010s. 

Financial Statements: The Party vs. shareholders: What drives corporate governance in China?

In today's session, Stanford Law School's Curtis Milhaupt and my PIIE colleague and coauthor Tianlei Huang debated the unique role of the Chinese Communist Party in corporate governance, and how to think about it in comparative terms vis-à-vis neighboring East Asian and other major economies. 

Financial Statements: Lessons for systemic liquidity risk from recent crises

Belatedly - in the session two weeks ago, I hosted Raghuram Rajan and Megan Greene to revisit the recent liquidity episodes and what may have been driving them.  

China’s state vs. private company tracker: now on a half-yearly pace

Following the in-depth analysis which Tianlei Huang and I published nearly a year ago on the respective shares of the private sector and state sector among China's largest companies, and the first update we published in October, the Peterson Institute has decided to publish our findings on market capitalization data as a regular tracker. The blog post below, published yesterday by PIIE, is the first such iteration.  

The private sector’s share of China’s largest listed companies continued to decline to 43 percent in the second half of 2022

The market assessment of economic and political developments in the second half of 2022 does not signal a decisive return to private-sector-led growth in China, even though that period includes the month of December, when China’s party-state unexpectedly ended its prior zero-COVID policy and signaled a more positive stance towards private sector development.

Latest data from PIIE’s semiannual tracker, “China’s state vs. private company tracker: Which sector dominates?”—which tracks market value of China’s top 100 listed companies (ranked by market value)—show a continued decline of the share of the private sector, from 44.5 percent at mid-2022 to 42.8 percent at year-end, continuing the downward trend of the previous two half-year periods from the 55.4 percent peak observed in mid-2021. Still, the private sector share remains higher than it was throughout the 2010s, when it rose dramatically from 8 percent at end-2010 to 36 percent at end-2019 (see figure).

It remains to be seen, then, whether China’s trajectory will be a pivot back to a Maoist-style economy that represses the private sector, or merely a new phase of market-driven development under changed political conditions. Building on our PIIE Working Paper published in 2022, the data presented here inform on the trend in the dynamism of China’s private sector beyond the rhetoric in China and the United States. The tracker focuses on the respective shares of state-sector and private-sector companies among China’s largest companies and thus provides a half-yearly market-based indicator of the private-state balance among Chinese companies. As in a previous update, the data at end-2022 suggest that President Xi Jinping’s “corporate rectification campaign” started in the summer of 2021 has dealt a heavy but far from lethal blow to China’s hitherto fast-rising private sector.

Recent discussions have focused on hybrid firms or ambiguous boundaries between private and state control. But the divide between the state sector and the private sector remains highly meaningful in analyzing contemporary China. As PIIE’s Nicholas Lardy and others have documented, the performance patterns and economic contributions of private-sector companies have differed from those of state firms since the early emergence of the former and restructuring of the latter during the bumpy era of the 1980s and 1990s. Large listed companies provide a decent proxy for the broader category of China’s largest companies, as more than half of the latter’s total revenue is made in listed entities. Stock prices are intrinsically forward-looking, subject to the whims of the market and occasional state intervention but not to political censorship or accounting manipulation.

The measures in PIIE’s semiannual tracker are not linked to general market price movements or index levels: If stock prices of state-sector listed firms rise or fall as much as those of private-sector listed firms, the relative shares that we track remain flat. As such, the respective shares of the private and state sectors can be viewed as decorrelated from cyclical growth and stock market dynamics, albeit somewhat related to structural growth trends if, as Lardy and others have argued, China’s growth is driven by private-sector expansion.

The measures in the tracker are based on the same methodology as in our 2022 PIIE Working Paper. All listed mainland Chinese companies are considered, including those that use mystifying variable-interest-entity arrangements, and are grouped into three categories: “state-owned enterprises” (SOEs) in which the state owns more than half of equity; “mixed-ownership enterprises” (MOEs) in which the state owns between 10 and 50 percent; and “nonpublic enterprises” in which the state owns less than a tenth of total equity, a conservative definition of China’s “true” private sector. In the definition used here, the state sector includes both MOEs and SOEs. Still, MOEs and SOEs are worth tracking separately, because state and party control is generally less direct and complete in the former than in the latter.

Even though market capitalizations can be observed in real time, these observations are intended to inform on structural trends rather than high-frequency fluctuations. To that effect, the data has been compiled yearly from 2010 to 2020 and half-yearly since 2021, as shown in the figure.

In 2022, additional quarterly monitoring indicated a pattern of small fluctuations rather than a monotonous soft decline: The share of the private sector fell to 42.1 percent at the end of the first quarter, then rose to 44.5 percent at mid-year, then fell back to 40.8 percent at the end of September (the lowest observation since end-2019), then rose back to its latest observed level of 42.8 percent at end-December. These additional quarterly data are not shown in the figure because that higher-frequency observation is not planned in future.

To sum up, the tug of war between the state and private sectors, as observed through the prism of market data presented here, remained largely static during a year that was otherwise rich in dramatic developments. Future updates will shed light on how the recent apparent signals of greater party-state friendliness towards the private sector are altering market participants’ assessment of its prospects relative to the state sector. 

Financial Statements: The City of London after Brexit: An update

In today's session of the Financial Statements series, William Wright and Caroline Atkinson debated the still unfolding structural consequences of the UK exit from the European Union, exactly two years about a previous session that was held only a few weeks after the British departure from the EU Internal Market. 

Financial Statements: Preparing the economy and financial system for hybrid war: Finland's experience

Today's session featured Olli Rehn, governor of the Bank of Finland, and Julia Friedlander, chief executive of Atlantik-Brücke, for a discussion of threats from Russia to the European financial system and Finland's unique experience in such matters. 

Financial Statements: Can regulation save crypto?

Belatedly - the session on December 13 featured Matthew Elderfield, who has experience as both a former supervisor and a former senior bank executive in Europe, and Karen Petrou, founder and managing partner of Federal Financial Analytics in the U.S. 

Financial Statements: Why did China build its Cross-Border Interbank Payment System and what does it mean for the dollar?

In today's session we discussed the nature and role of China's Cross-Border Interbank Payment System (CIPS), with Felix Chang and Emily Jin. 

Op-ed in ThinkChina: China's private sector has continued its rise against all odds

This op-ed co-authored with Tianlei Huang was published today by ThinkChina, the English-language operation of leading Singaporean daily Lianhe Zaobao. 

Op-ed in SCMP: What's next for China's private sector

This op-ed co-authored with Tianlei Huang was published today by the South China Morning Post. 

Financial Statements: Financial stability and policy risks in the euro area

In today's session, I hosted Peter Praet, former ECB Executive Board member and now at Solvay Business School, and Guntram Wolff, former Director of Bruegel and now head of DGAP. It was a wide-ranging conversation on risks to financial stability in the euro area, with emphasis on the consequences of monetary policy decisions. 

Collective paper on completing the banking union

I co-authored a collective paper on the incompleteness of Europe's banking union and how to address it in future reform, which was published earlier this week by the Centre for Economic Policy Research (CEPR) and is forthcoming at Bruegel. This is joint work with Thorsten Beck, Jan Pieter Krahnen, Philippe Martin, Franz Mayer, Jean Pisani-Ferry, Tobias Tröger, Beatrice Weder di Mauro, and Jeromin Zettelmeyer, following a workshop held at the European University Institute in September 2021. Click here to download the paper in case the above link is broken. 

Update (November 22): the Bruegel version was just published. Click here to download it if the previous link is broken. 

Interview on current EU financial services issues in European Commission Finance Newsletter

I gave an interview on the consequences of Brexit for the EU financial system, for the European Commission's Finance Newsletter (edited by DG FISMA). The full text is reproduced below with gracious authorization from the European Commission. 

Six years on from the Brexit referendum, the EU is still not fulfilling its full potential as an attractive place for market financing. Is the EU missing the opportunity of Brexit when it comes to financial integration?

The EU had a pretty integrated wholesale financial system before Brexit, with a clearly identified hub in London. London was acting as the central venue, with centralised supervision by the UK authorities under UK law. Now London is off-shore, it is clearly not sustainable for the EU to have the same critical reliance on London as it had when London was on-shore. What that means in practice is that we lose in market integration because the activity we have on-shore is scattered in various financial centres. This is not a problem in itself, but these financial centres are under different legal and policy regimes and that’s where the problem is. There are two possible solutions to this. One is that one of the EU on-shore financial centres would replace London. The other is that we have policy integration, so that activities can remain scattered geographically but are integrated in terms of the policy regime and oversight framework. Clearly the latter solution is better. But it would mean new impetus for policies that frankly have stalled – such as Banking Union and Capital Markets Union. And at this point, it is clear that Brexit has not triggered an acceleration of those policies.

You mention the Capital Markets Union – the Commission has already put forward a raft of measures under its Capital Markets Union agenda to support market integration. What is still missing to allow us to achieve deep and fully integrated capital markets in the EU?  

This debate is not new. I believe it goes back to 1965, with the first Commission report on financial markets integration. And frankly, many of the questions that were raised in that report are still open. So in a way it’s not surprising that the Capital Markets Union agenda is not moving quickly because it’s a long-term structural agenda. With that in mind, I would have two observations. First, one may question the wisdom of calling it a Capital Markets Union, as if it were a clearly defined project with a clearly defined start and end. I would argue that this is the case for Banking Union – it had a start and it hopefully will have a date of completion. I’m not sure that this is the same for Capital Markets Union to the same extent, so I would question the label. The good old days when we called it the ‘single market policy for financial services’ had some charm for me – but that makes me a nostalgic! The second, more substantial, observation is that the package of measures proposed by the Commission, going all the way back to 2014 when Jean-Claude Juncker first proposed Capital Markets Union as a label, have been useful but not transformational. I think – especially when you compare it with Banking Union, which is still very much unfinished, but where there has been a structural transformation – everything so far in ‘Capital Markets Union land’ looks a little bit incremental.

Have the recent crises – specifically the Covid-19 pandemic and Russia’s aggression against Ukraine – undermined our efforts to develop a genuine single market for capital in the EU? Or have they actually reinforced the need for one?

The pandemic has stopped a number of workflows and has delayed others, such as the one on anti-money laundering. But it has also resulted in one big transformation, not in the area of DG FISMA but something that has huge importance for what we are talking about and that is NextGenerationEU, which has demonstrated that large-scale issuance of EU bonds is possible. The consequences of that transformation will take time to unfold, but I expect them to be very constructive and a positive move in the direction of building a more integrated and better-developed European capital market. So that’s a plus. As for the Ukraine crisis I think it’s frankly too early to say, because we are still at an early stage, sadly. I am inclined to believe, but with no certainty, that the Banking Union agenda could have made more progress, and there could have been a better compromise in June, if Russia hadn’t invaded Ukraine. But of course we can never know. One of the big questions about the Ukraine war is whether it will create the need for more EU bond issuance, along the lines we’ve seen with NextGenerationEU. And again, I don’t think anybody has an answer at this point.

Looking at financial stability risks, the EU is still very reliant on some UK-based clearing infrastructure. Some believe that Europe should just legislate and move all the clearing business to the EU. What are your thoughts on this?

I applaud the Commission for its restrained and measured approach so far. Because the clearing infrastructure is very ‘sticky’, and the London-based clearing infrastructure is a global infrastructure, it’s not just a European infrastructure. I am thinking in particular of the reliance on London Stock Exchange clearing house LCH for derivatives clearing, which is at the core of this debate. So it’s important not to frame this issue in narrowly EU terms because that’s not what it is, particularly when it comes to market liquidity. I haven’t been convinced yet that relocation is necessary, even in the long term. Because the long-term vision for the EU market is that it is globally connected. So I’m not sure what the right answer is long term, but I think the Commission has been right to be cautious. Speaking of clearing and financial infrastructure, I want to highlight what I think is an obvious paradox and that is that the EU now has an EU-level supervisory capacity for LCH.Clearnet through the Central Counterparties (CCP) outfit that has been created within the European Securities and Markets Authority (ESMA). But it doesn’t have it for its own domestic critical infrastructure, which remains under national supervision with relatively loose supervisory coordination at ESMA. I think I’m stating the obvious if I say this doesn’t make any sense.

How close do you think we are to a truly integrated and independent EU-level supervision of capital markets?

I think the story of Banking Union and of anti-money laundering supervision has demonstrated the centrality of the question of supervision. Obviously I believe supervisory integration is needed for Capital Markets Union. But here I would make two additional points. Firstly, one thing we’ve learned primarily through the ‘Eurozone crisis’ is that it’s not really plausible that we would achieve a Capital Markets Union without completing the Banking Union. We can debate how far we are from completing Banking Union, but I think everyone agrees that we are not there yet. Even with the strong Single Supervisory Mechanism (SSM) at the European Central Bank, which is a pretty impressive achievement. Secondly, I would say that it is a bit simplistic to say ‘let’s just give more powers to ESMA over more market segments’. The reason for that is that ESMA was not designed initially as the EU market supervisor, just like the other European supervisory authorities (ESAs). It was designed for the more modest purpose of coordination of supervision and arguably doesn’t have the governance and funding framework to be an effective, independent supervisor itself. This is not a comment on individuals, but rather on the architecture and legislation that establishes that architecture. And the only way to fix that is through change to the ESMA regulation. In a way, the SSM, and soon the Anti-Money Laundering Authority, show the way. And you could say the same to a certain extent of the Single Resolution Board. You need a more compact board, you need financing by levies on industry, those elements that establish an architecture that makes ESMA’s supervisory decisions de-politicized, independent and based on the supervisory mandate, which I’m not sure is the case with the current architecture. So this would be an important caveat: let’s not think of policy integration as just accruing more mandates on ESMA, at some point there has to be a reform of ESMA that makes it fit for purpose as an effective, independent supervisor. Finally, at a more general level, I would say I have perhaps a kind of old-fashioned view of the role of the Commission – I think it’s there to keep the discussion honest among Member States. So although I’d like to see faster progress, ultimately I think that these things take time.

Nicolas Véron speaks here in his capacity as a policy observer at Bruegel and the Peterson Institute. He is also an independent non-executive board member of DTCC Data Repository (Ireland) Plc, which is supervised by ESMA.

© European Union, 2022

Financial Statements: Are Germany’s institutional protection schemes an obstacle to EU banking reform?

In yesterday's session at PIIE, I hosted Tobias Tröger of Goethe University Frankfurt and Michael Wolgast of Berlin Global Advisors to discuss Germany's two idiosyncratic institutional protection schemes around savings banks (Sparkassen) and cooperative banks (Volksbanken and Raiffeisenbanken), and their impact on EU banking reform options. 

China’s private sector advance pauses, but the trend is unclear

This blog post, coauthored with Tianlei Huang, was published today by the Peterson Institute. 

Update: the same text was published by Bruegel on October 19. 

After rising at an almost continuous pace for at least a decade, the share of private sector ownership among China’s largest companies has dropped since 2021. It is tempting to infer that President Xi Jinping’s statist policies have brought an end to the age of private-sector expansion in China. But such a conclusion would be simplistic and premature. Several factors beyond China’s turn toward state dirigisme are driving the recent pause in the rise of the private sector, including global commodity price increases and China’s property crisis.

To be sure, China’s policy has in recent years promoted the power of the state and of the state sector within the economy. Among its initiatives was the regulatory crackdown in the summer of 2021, which wiped out hundreds of billions of dollars from the market capitalization of some of China’s most prominent private companies. Such arbitrary state interventions in private business over the last decade have led many to conclude that the days of expanded influence by private companies in China are gone.

A recent drop in the advance of the private sector is illustrated by figures 1 and 2, which provide an update to what was documented in a PIIE Working Paper published in March 2022. The latest data builds on research showing a near-continuous increase of the share of private-sector companies among Chinese companies listed in the Fortune Global 500 rankings by revenue since 2005, and in the market value of those that were listed and among the 100 most valuable since 2010.[1] In the revenue data until 2020, there had only been a temporary dip in 2017; the market value series until end-2021 reflected a slight drop from the peak in end-2020.

Figures 1 and 2 use more recent data, and for market value, a higher frequency of observation, both indicating the recent decline. Among all the Chinese companies on the Fortune Global 500 rankings, the private sector’s share of their aggregate revenue decreased slightly in 2021 from the level in 2020 (figure 1). As for market value, the private sector’s share among the 100 largest publicly traded Chinese companies declined from a peak at 55.4 percent of the total as of mid-2021 to 42.1 percent by the end of March 2022, followed by a slight rebound to 44.5 percent as of mid-2022 (figure 2).[2] The private sector’s share also dropped in most other metrics in 2021 (figure 3).

 

A closer look at sector-specific dynamics shows the drop is caused by several parallel events

As in the working paper, each company was assigned to one of 14 sectors for a more granular understanding of the dynamics. The shares of the private-sector and state-sector contributions in each sector were calculated relative to the aggregate total, indicating variations over the past year.[3] The three largest (positive or negative) variations are shown in tables 1 and 2. The tables also distinguish how much of each variation is a result of changes in the revenue or market value of the same companies that feature in both the mid-2021 and mid-2022 rankings (“same-scope” variation). These variances are indicated as opposed to those companies that entered or exited the sample during the period because their gain or loss of revenue or market value made them cross the size threshold for inclusion (“entry/exit”). In the rankings by revenue (table 1), there were also four companies that did not report their 2021 financial data (“no-shows”) and thus not included in the latest Fortune ranking, as detailed below.

Tables 1 and 2 tell different stories. This difference is not surprising, since market value is a forward-looking indicator (the sum of discounted expected future free cash flows, minus net debt), while revenue reflects activity during a given year. Market values are also inherently more volatile than revenue numbers, as illustrated by the significantly larger variations in table 2 than in table 1.

The revenue story (table 1) has two main drivers, neither of which appears to represent a long-term trend. First, surges in global commodity prices translated into higher revenue of companies in two of the 14 sectors (oil, gas, and chemicals; steel, metals, and minerals), most of which are state-owned. This phenomenon shows up in same-scope variation (e.g., Sinopec’s revenue grew more than 40 percent in 2021) and in entry/exit variation (with four oil, gas and chemical state-owned enterprises and three others in the steel, metals and materials sector just entering the Fortune ranking this year). This driver is dominant, representing more than twice the variation in the aggregate share of the private sector (3.96 percent for the two sectors combined, versus 1.64 percent for all sectors).

In addition, four private-sector companies were “no shows” in the latest ranking, namely real estate developers Evergrande and Sunac and conglomerates Yango Longkin and Cedar Holdings. That driver also has significant impact: three-quarters of the aggregate net decrease of the share of the private sector for the two real estate developers alone (1.22 percent out of 1.64 percent). “No-shows” were similarly prominent drivers of the previous private-sector drop in 2017 and included the highly leveraged conglomerates Anbang, CEFC Energy, Dalian Wanda, and HNA, all of which stopped being listed by Fortune from that year. Neither of these two main revenue drivers looks permanent. Commodity prices go up and down; and only two private-sector developers (and one private-sector conglomerate) in the latest list that could become “no-shows” in the future.

The market value story is different (table 2). The largest driver by far is that the market value of platform companies went sharply down, their future profitability cast in doubt by the regulatory crackdown by the Chinese government. Their revenue kept rising in 2021, though less than in most other sectors. The relative decline of platforms’ market value explains most of the change in the respective shares of public and state sectors in total market value (8.29 percent out of 10.85 percent).

In sum, the drop’s drivers are diverse, and different for figures 1 and 2. They tell a more nuanced story about factors at work beyond the role of statist policies suppressing private-sector dynamism. The rise in commodities prices is exogenous. The property crisis is directly triggered by the “three red lines” policy of forced deleveraging in that sector introduced by the government in August 2020. But the property downturn also reflects a deep-rooted systemic problem driven by the financing needs of local governments dependent on property related revenues. Even Beijing’s regulatory crackdown on private-sector platforms appears to have been motivated by more than just a retaliation against the power of large private businesses. Altogether, the drop in the previous private-sector advance should not be viewed as the start of a new trend of continuous decline, at least not yet. Further updates will be published periodically in the future.

The authors are grateful to Abigail Dahlman for excellent research assistance.

Notes

1. We adopt a restrictive definition of the private sector as those companies in which the state owns less than 10 percent of equity capital. Our definition of the state sector includes all other companies, with a distinction between majority-owned state firms, and those in which the state owns between 10 and 50 percent of capital which we label “mixed-ownership enterprises.” Our taxonomy is thus entirely based on ownership, irrespective of various forms of political influence, which are harder to quantify. In terms of date cutoff, our series in the working paper covered the period until the (calendar) year 2020 for revenue, and until end-2021 for market value. The two datasets we analyzed are not exactly synchronous, since market value can be observed in real time, whereas revenue numbers and the Fortune rankings are published with a lag. Details of our methodological choices and definitions are to be found in the working paper.

2. We checked changes in ownership categories over the last year for all the companies featured in the latest rankings by revenue and market value and we found none, or in other words, neither “nationalization” nor “privatization.” This is in line with previously observed stability of these categories for China’s largest companies, as documented in more detail in the working paper.

3. More precisely, we observe the variation between calendar years 2020 and 2021 for revenue, and between mid-2021 and mid-2022 for market value.

Financial Statements: Tokyo and the contest for prominence among Asian financial centers

I today's episode, I hosted Nakagawa Saiko of Japan's Financial Services Agency and Sumit Agarwal of the National University of Singapore, to discuss the prospects for Asian financial centers in the wake of China's crackdown on Hong Kong, Brexit, and other regional and global developments. 

Financial Statements: Ukraine's economy and finances, seven months into the war

In today's session I hosted Oleg Churiy and Olena Bilan to discuss the state of Ukraine's wartime economy, fiscal position, financial conditions including in occupied territories, and options for public financing.