The Role of State-Owned Enterprises in Promoting High- Quality Economic Development: The Case of China

The Chinese economy is attempting to undergo a critical transition,
shifting from a growth model driven by the intensive exploitation of
traditional production factors to one centered on high-quality economic
development (HQED). This new stage prioritizes regional coordination,
environmental sustainability, trade and investment openness, and income
redistribution to enhance the economy’s potential for innovation. This
study argues that specific features of China’s socialist system endow
state-owned enterprises (SOEs) with the institutional capacity to
effectively address structural barriers that could hinder this transition. We
employ the entropy weight method to construct five sub-indexes that
comprehensively measure different dimensions of HQED. Using timeseries
data from 1996 to 2022, we then apply a vector error correction
model to analyze the relationship between the growth of state-owned and
privately-owned industrial capital stock and trends in the five dimensions
of HQED. Our findings indicate that the growth of state-owned industrial
capital significantly contributes to reducing regional disparities, promoting
environmental sustainability, fostering international openness, and
mitigating social inequalities. Furthermore, the combined growth of stateowned
and private industrial capital has a long-term positive impact on
innovation capacity. These results suggest that market socialism
effectively allocates resources to support the development of productive
forces in economies navigating the challenges of transitioning beyond
middle-income status.