This piece correctly identifies the major reasons why the state share of China's economy stays high: the political pressure to keep growth high, and the resulting push of resources into sectors with high state ownership, infrastructure and real estate. https://twitter.com/michaelxpettis/status/1254387885085777922

Enabling all this of course is the rapid expansion of the financial sector, which is itself the sector with the highest level of state ownership. Other things being equal, rapid growth of finance, infrastructure & real estate increases the state's share of the economy.

Complicating the "China has no choice" story however is the fact that since 2017, Xi's government has moved to 1) de-emphasize high growth rates, 2) rein in growth of the financial sector, 3) cool down property sales, 4) control local government borrowing for infrastructure.

All of these trends would tend to reduce the state's share of the economy rather than raise it. Xi does not get credit for doing this mainly because at the same time he is going around loudly talking about how great SOEs are and how much China needs them.

Yet the fact that Xi did actually endorse a macroeconomic framework that is somewhat less favorable to SOEs is, I suspect, one reason why he retains the loyalty of a lot of the so-called "reform" figures, who are not obvious constituents for his lefty rhetoric.

Given the realities of China's political economy, we should never expect "reform" to mean major SOE privatization. But conservative financial policies that tend to limit the flow of resources to SOEs are apparently possible, and have a lot of support among local economists.

The main problem with those conservative financial policies has turned out to be that they also limit the flow of resources to private-sector companies. So it's not yet clear whether the state share of the economy has declined on net as a result.

I'd say it's not impossible for the state share of the economy to edge down if these conservative policies were to continue for a few more years. But it's now very unclear whether these policies are going to survive the need to drive a post-coronavirus recovery. /end thread