Nicolas Véron

Financial Statements: Do EU regulations unduly penalize securitization?

In today's session, I hosted the Bank of France's Emmanuelle Assouan and Sebastian Mack of the Jacques Delors Centre in Berlin, to discuss the trade-offs of EU policy regarding securitization in the context of the Capital Markets Union project.

Bruegel Memos for the new EU leadership 2024: Unite, defend, grow

As every five years since 2009, Bruegel this week published a compendium of memos to the new EU leadership covering many areas of policy. Silvia Merler and I contributed the memo to the new Commissioner for financial services. The memo was discussed at one of the panels of the Bruegel Annual Meetings on Wednesday 4 September. 

Click here for a PDF version of the Financial Services memo. 

PIIE Tracker: China's private sector has lost ground as state sector has gained share among top corporations since 2021

In this latest update of the PIIE tracker jointly prepared with Tianlei Huang and published on September 3, we complement the customary market capitalization analysis with a complementary one based on revenue. 

This half-yearly PIIE tracker of the respective shares of state-owned, mixed-ownership, and privately-owned companies among China's largest companies shows that the private sector has been losing ground while the state has been gaining greater shares among China's top ranked corporations in recent years. Panel a of the chart shows the share of aggregate market capitalization of China's largest 100 listed firms by company ownership, while panel b shows the share of aggregate revenue of all Chinese corporations included in the Fortune Global 500, also by company ownership.

This tracker is based on the methodology defined in our 2022 Working Paper. The private sector is defined restrictively as firms with less than 10 percent state ownership. The state sector includes both mixed-ownership enterprises (MOEs), in which the state owns between 10 and 50 percent, and majority-owned state-owned enterprises (SOEs).

Privately-owned firms' share of market capitalization among China's 100 largest listed companies shrank from a peak of about 55 percent in mid-2021 to just 33 percent at the end of June this year, a decline of more than 40 percent in only three years (see panel a). At the same time, the share of state-owned enterprises, namely those majority owned by the Chinese party-state, rose steadily from less than one-third to about 54 percent.

Though what panel a shows is an indication of market sentiment, not of real economic performance, and it is of relative shares, not absolute levels of market value, this stock price phenomenon is actually not disconnected from economic fundamentals. On the contrary, the two have been remarkably correlated. Panel b shows that the private sector's share in the aggregate revenue of China's largest companies included in the Fortune Global 500 rankings, whether publicly listed or not, has also stagnated in recent years since reaching a peak in 2020.

These developments look increasingly structural. The authorities' stance since 2020, including regulatory tightening and zero-COVID lockdowns, appear to have inflicted long-lasting damage to China's private economy, the dynamism of which was a defining feature of its economic miracle in the past four decades. Nearly 20 months into China's COVID reopening, the private sector has yet to bounce back, despite many pro-private business utterances and gestures from China's leadership. In sum, the findings here corroborate the view that China continues to suffer from "economic long COVID."