DP 2022/2 - Makram El-Shagi / Lin Zhang: The role of SOEs in the transmission of fiscal policy shocks in China

Makram El-Shagi, Lin Zhang

CFDS Discussion Paper 2022/2


In this paper, we demonstrate the importance of state-owned enterprises (SOEs) for the conduct of fiscal policy in China using both a structural VAR based on macroeconomic data and a panel model utilizing firm-level data. We show that SOEs respond fundamentally differently to fiscal policy shocks than non-SOEs. Our results strongly indicate that SOEs are not merely competition to non-SOEs but rather that their resources are leveraged as part of fiscal policy to support and stabilize the private economy.   

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