Moynihan Trade Development and Political Economy: Global Concentration and the Rise of China

Caroline Freund on Global Concentration and the Rise of China

Caroline Freund, Senior Fellow, Peterson Institute for International Economics

Using firm level data, we examine how global concentration has changed over the last decade in light of the rise of China. We find that global concentration has declined in most industries, is falling on average across industries, and there is significant churning of firms at the top of the distribution. The enhanced industrial competition is partly attributable to the rising market shares of emerging market firms at the expense of incumbent industry leaders. However, global concentration has risen significantly in a number of industries where Chinese state-owned  enterprises dominate, such as mining, metals, real estate and construction. Controlling for mergers and acquisitions and other factors, we find that the presence of a Chinese SOE at the top of the firm - size distribution is associated with a 4 percentage point increase in concentration. The results imply that while the overall impact of China’s rise has been a small but significant increase in global competition, state-ownership has significantly distorted global competition in a number of industries. 

Caroline Freund, senior fellow at the Peterson Institute for International Economics, was chief economist for the Middle East and North Africa at the World Bank (2011–13). Prior to that she has held various important positions at the World Bank, the International Monetary Fund and the Federal Reserve Board. Freund works primarily on economic growth and international trade and also writes on economic issues in the Middle East and North Africa. She has published numerous articles in top economics journals, including American Economic Review, Quarterly Journal of Economics, Review of Economics and Statistics, Journal of International Economics, and Journal of Development Economics. She holds a PhD in economics from Columbia University. 

Sponsored by the Trade Development and Political Economy Program at the Moynihan Institute of Global Affairs