Analysis: Beijing tightens its grip on industry with billions in aid

IT WAS once supposed that the state-controlled industrial sector would eventually be eclipsed by its rapidly growing private sector, as China's Communist ideals became largely a matter of lip-service. However, according to the lastest report on China by the World Bank, this simply isn't the case.

The state-controlled sector is growing, not contracting. Moreover, investment by state-controlled companies has rocketed, driven by hundreds of billions of dollars of government spending and state bank lending to combat the global financial crisis.

Private sector businesses say they were left to struggle without aid. The gap was so striking that the Chinese press coined a term for it: "Guo jin, min tui", or "the state advances, the private sector retreats."

Once eager to learn from the United States, China's leaders during the financial crisis have reaffirmed their faith in their own more statist approach to economic management, in which private capitalism plays only a supporting role.

"The socialist system's advantages," prime minister Wen Jiabao said, "enable us to make decisions efficiently, organise effectively and concentrate resources to accomplish large undertakings."

Most experts say the vast bulk of the $588 billion (380bn) stimulus package that China pumped out for new roads, railways and other big projects went to state-owned companies. Some of the largest companies used the flood of money to strengthen their dominance.