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State-owned enterprises in China are far more numerous and larger (in absolute and relative terms) than in other countries. One explanation for the number and size of Chinese SOEs is that they are used by the Chinese government to manage the Chinese economy. In this paper, we use Chinese firm-level data in a difference-in-difference framework to examine how China implements its industrial policy, focusing on the role of SOEs in the 10$^\text{th}$ Five Year Plan. We find that China relied on state-owned enterprises to achieve higher average productivity in the sectors supported by the plan. To understand the source of this productivity increase, we examine different forms of government support (subsidies, tax credits) received by different types of firms.
