State-Owned Enterprise Reform in China

One of the important ingredients of Deng Xiaoping’s reform programme of the late 1970s was the establishment of state-owned enterprises (SOEs) to manage economic institutions hitherto directly administered by government bureaucrats in a centrally planned economy. Although this reform measure did enhance the management autonomy and incentives, these SOEs still carry the government’s economic policy goals, which inhibit the economic performance of the enterprises. The current wisdom is to grant legal status to these enterprises via total privatisation. Indeed, the question arises as to what extent can such a corporate structure exist as a mainstay of the economy while China still claims to be a socialist economy? This book is a continuation of the authors’ earlier publication, The China Miracle: Development Strategy and Economic Reform (1996). In this volume, the authors review the historical evolution of the SOEs, analyse the current problems, and suggest the direction for future reforms. They argue that further reforms can be achieved by eliminating the unfair competition conditions confronting the SOEs rather than by realigning the corporate ownership rights as so often suggested.