China’s State-Owned Enterprises: Their Role, Job Creation and Efficiency in Long-Term Perspective
Author(s)
Putterman, Louis; Dong Xiao-Yuan
Abstract
Since the early 1990s, China’s state-owned industrial sector has experienced severe and increasing stress. When the reform process emerged in 1992 from its post-Tiananmen doldrums, China’s policy and rhetoric on state-owned enterprises (SOEs) began shifting steadily. In 1994, the government announced a major program of reforms with the theme of transforming SOEs into “modem corporations.” A new round of experiments began in selected enterprises and cities, but a few years later, observers were more agreed than ever that efforts to improve the efficiency of the SOEs had been inadequate. After years of fretting about mounting SOE losses, government policy shifted toward acceptance of a quiet but nevertheless large-scale privatization of small- and medium-sized SOEs. By 1997, the World Bank, which had until then shown a notable patience with China’s SOEs, was calling for the selection of no more than one thousand industrial SOEs for continued state majority share ownership and was recommending a more passive state role in all SOEs. China’s leadership appeared increasingly prepared to accept such recommendations.
