Delong and the short of it

The Delong case turns some common perceptions of the private sector in China upside down.

Last month China's state media began reporting that Xinjiang Delong, a private sector conglomerate run by Tang Wanli may have misappropriated at least Rmb6 billion $725 million in funds. The fall-out has compromised China's already battered stockmarket and raises at least two major questions about the nature of the Chinese private sector. The first question is whether private companies automatically have better and more efficient growth prospects than the state sector. The second concerns the accuracy of a popular assumption that private companies cannot easily access financing.

Many Western observers see the emergence of the private sector as a reassuring imitation of Western economic evolution. Chinese investors tend to be more...

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