For an economy that's growing so fast, you'd think raising growth further would be impossible. Indeed, if China corrected its exchange rate, most expect its exports, and therefore growth, to fall. Well, according to a research paper by IMF-World Bank staffers, efficient allocation of resources between private firms and state-owned enterprises (SOEs) would transfer two-thirds of the capital being used by SOEs to the private sector, and this would increase the country's GDP by 5 per cent. According to the study, SOEs represent around a third of the country's output but account for more than half the lending by banks. According to the study, the efficiency of public sector firms (Marginal Revenue Productivity of Capital, or MPRK) is much lower than that of private firms. While the median MPRK of private firms in China is 63 per cent, that for wholly and majority state-owned firms are 37 per cent and 52 per cent respectively.
