Among SOSHEs, the most critical role is that of SHMEs, who are at the core of the R&D effort in China's industry, contributing about 27% of LMEs' total R&D funds and personnel.
The other sub-component is that of SHMEs, which carry out the bulk of China's R&D activities in the industrial sector.
(21) With the term 'public sector' we refer to all SOSHEs, that is both SOEs and SHMEs.
(22) As previously noticed, SHMEs are also very profitable.
The K/O ratio is highest among SOEs at about 1.5, but markedly less so (around 1.1) in even more capital-intensive SHMEs. Mostly small and labor-intensive domestic private firms exhibit a much lower figure (less than 0.6) (see graph 7).
Conversely, SHMEs are only marginally more capitalized than SOEs, but their productivity and profitability indicators are far superior, suggesting that their organizational, managerial, and ownership structures are indeed more effective.
SHMEs are few: only 2.7% of all industrial enterprises, a share even smaller than that of SOEs.
SHMEs' capital/output ratio, while lower than that of SOEs, is higher than those of private and privately-controlled enterprises10 (see Graph 7).
In this respect it has to be taken into account that, while only a minority of SHMEs are large (the others being mostly MEs), they include as their core the 100-odd subgroup of very large industrial champions managed by SASAC.