Impact and significance of state-owned enterprise restructuring in China

China Journal

Volumn , Issue 55, 2006, Pages 35-63

  Garnaut, Ross ^a,b   Song, Ligang ^b,c   Yao, Yang ^d  

^a Research School of Pacific and Asian Studies   (Australia)

^b AUSTRALIAN NATIONAL UNIVERSITY   (Australia)

^c Asia Pacific School of Economics and Government   (Australia)

^d PEKING UNIVERSITY   (China)

Author keywords

[No Author keywords available]

Indexed keywords

STATE OWNED ENTERPRISE;

ASIA; CHINA; EURASIA; FAR EAST;

EID: 33644674756     PISSN: 13249347     EISSN: None     Source Type: Journal    
DOI: 10.2307/20066119     Document Type: Article

References (50)

1. The authors are principal researchers in this survey. The survey adopted a research strategy that combines structured questionnaires distributed to firms selected by random sampling with face-to-face interviews with government officials and enterprise management selected to provide insights into the privatization process and its outcomes. While the sampling provides quantitative data, the interviews reveal rich qualitative information regarding different government policies and various problems that have been encountered in gaizhi.
2. For a more comprehensive coverage of these issues, see Ross Garnaut, Ligang Song, Stoyan Tenev and Yang Yao, China's Ownership Transformation: Process, Outcomes, Prospects (Washington: International Finance Corporation; the World Bank, 2005).
3. Roger Gordon and Wei Li, "The Change in Productivity of Chinese State Enterprises, 1983-1987", Journal of Productivity Analysis, Vol. 6, No. 1 (1995), pp. 5-26;
4. Theodore Groves, Yongmiao Hong, John McMillan and Barry Naughton, "Autonomy and Incentives in Chinese State Enterprises", Quarterly Journal of Economics, Vol. 109, No. 1 (1994), pp. 183-209;
5. Theodore Groves, Yongmiao Hong, John McMillan and Barry Naughton, "China's Evolving Managerial Labor Market", Journal of Political Economy, Vol. 103, No. 4 (1995), pp. 873-92;
6. Wei Li, "The Impact of Economic Reform on the Performance of Chinese State Enterprises, 1980-1989", Journal of Political Economy, Vol. 105, No. 5 (1997), pp. 1080-106.
7. "Guanyu xiaoxing guoyou gongye qiye zulin de zhanxing guiding" (Tentative Regulations on the Lease of Small State-owned Industrial Enterprises), State Council, 20 May 1988.
8. Xiao Zhao, "Jingzheng, gonggong xuanze he zhidu bianqian" (Competition, Public Choice and Institutional Change), CCER Working Paper No. C1999025, 1999, Beijing University.
9. Xiao Zhao, "Jingzheng, gonggong xuanze", p. 21.
10. Yang Yao, "Privatising the Small SOEs", Chapter 7 in Ross Garnaut and Ligang Song (eds), China's Third Economic Transformation: the Rise of the Private Economy (Routledge: London, 2004), pp. 91-101.
11. Shao'an Huang and Jian Wei, "A Research Report on State-Owned SMEs in Zhucheng", mimeo, School of Economics, Shangdong University, 2001;
12. Yang Yao, "Privatising the Small SOEs".
13. In 1994, the State Economic and Trade Commission, sent a report, "Guanyu gaohuo xiaoxing guoyou qiye de jianyi" (Suggestions on Revitalizing Small State-owned Enterprises), to then Vice-Premier Wu Bangguo, who was in charge of enterprise reforms. In September 1995 the policy was formally announced by the Central Committee of the Chinese Communist Party in one of its plenaries and went forward as a suggestion for the Ninth Five-Year Plan.
14. Xiao Zhao, "Jingzheng, gonggong xuanze", p. 18.
15. Xiao Zhao, "Jingzheng, gonggong xuanze", p. 25.
16. Xiao Zhao, "Jingzheng, gonggong xuanze", p. 29.
17. This assumption is subject to two qualifications. First, some firms may have vanished not because of privatization but because of simple closing-up, which implies that our measure of privatization is upward-biased. Second, new SOEs may be established over the period, which implies that the measure is downward-biased.
18. Qin Hui (1998), Jiangzhe xiangzhen qiye zhuanzhi anli yanjiu (Case Studies of TVE Ownership Transformation in Jiangsu and Zhejiang) (Hong Kong: Chinese University of Hong Kong, 1998).
19. Unpublished report of the National Bureau of Statistics.
20. Unpublished report of the State Economic and Trade Commission.
21. Shanwen Gao and Yang Yao, "Implementation of Socially Optimal Outcomes in the Process of Dissolving Public Enterprises in China", China Economic Review, Vol. 10, No. 1 (1999), pp. 41-58.
22. Simeon Djankov and Peter Murrell, "Enterprise Restructuring in Transition: A Quantitative Survey", Journal of Economic Literature, Vol. 40, No. 3 (2002), pp. 739-792.
23. See Simeon Djankov and Peter Murrell, "Enterprise Restructuring in Transition", for a survey.
24. Jean C. Oi, "Patterns of Corporate Restructuring in China: Political Constraints on Privatization", The China Journal, No. 53 (January 2005), pp. 115-36.
25. The difference in total number of gaizhi firms reported in Tables 2 and 3 is due to the discrepancies occurred when reporting the numbers across cities (Table 2) and years (Table 3).
26. Shanwen Gao and Yang Yao, "Implementation of Socially Optimal Outcomes", pp. 41-58.
27. The Supreme Court (2001), Guanyu renmin fayuan zai shenli qiye pochan he gaizhi anjian zhong qieshi fangzhi zhaiwuren taofei zhaiwu de jinji tongzhi (Urgent Decree for Strictly Avoiding Debt Evasion in Trials of Enterprise Bankruptcy and gaizhi Cases in the People's Court), the Supreme Court Decree (2001) No. 105.
28. See Simeon Djankov and Peter Murrell, "Enterprise Restructuring in Transition", for a survey.
29. These competitive forces forced many SOEs to restructure rather than to privatize during the 1980s and 1990s, leading to the emergence of some very successful SOEs, such as Haier, without privatization.
30. Yuanzheng Cao, Yingyi Qian and Barry Weingast, "From Federalism, Chinese Style to Privatization, Chinese Style", Economics of Transition, Vol. 7, No. 1 (1999), pp. 103-31.
31. Kai Guo and Yang Yao, "Causes of Privatization in China: Testing Several Hypotheses", Economics of Transition, Vol. 13, No. 2 (2005), pp. 211-38.
32. See Xueliang Ding, "The Illicit Asset Stripping of Chinese States Firms", The China Journal, No. 43 (January 2000), pp. 1-28.
33. Stoyan Tenev and Chunlin Zhang with Loup Brefort, Corporate Governance and Enterprise Reform in China (Washington, D.C.: World Bank; International Finance Corporation, 2002).
34. At the central level, it is the State-Owned Assets Supervision and Administration Commission (SASAC) which is responsible for carrying out enterprise restructuring in those centrally administered, large-size SOEs. SASAC is responsible for regulating the gaizhi process. It has promulgated a series of regulations dealing with the transformation of SOEs in response to the "irregularities" resulting in the loss of state assets since 2003.
35. Clause 12(1), "Guanyu chuli qiye pochan shenqing wenti de ruogan guiding" (Regulations on Issues of Processing Applications for Enterprise Bankruptcy), Supreme People's Court, 1 September 2002.
36. See the People's Bank of China, "Guanyu jiaqiang zhaiwu guanli, jianli fangzhi he chengfa taofeizhai tixi de tongzhi" (Notice on strengthening management of debt liabilities and building a system of preventing and penalizing the behavior of avoiding financing debts), 7 January 1997.
37. Holger Wolf, "Transition Strategies: Choices and Outcomes", Princeton Studies in International Finance, Vol. 85 (June 1999), p. 4.
38. Anthony Gar On Yeh, "Dual land market and internal spatial structure of Chinese cities", in Laurence J. C. Ma and Wu Fulong (eds), Restructuring the Chinese City: Changing Society, Economy and Space (London: Routledge, 2005).
39. "Labor disputes on the rise", People's Daily, 1 November 2004.
40. Xiagang literally means "losing the position". An employee is called a xiagang employee if he stops working in the factory but nevertheless keeps a nominal tie with the factory through work registration. In effect, xiagang and unemployment are equivalent in terms of the status of the worker, but government policies are different for the two categories of worker. The benefit of being described as xiagang, rather than as officially unemployed, is that people are still counted as employees and may have the chance to resume working the enterprise, although in reality this does not often happen.
41. Jean C. Oi, "Patterns of Corporate Restructuring in China", p. 135.
42. Gerard Roland, "The Political Economy of Transition", Journal of Economic Perspectives, Vol. 16, No. 1 (2002), pp. 29-50.
43. Workers and staff members retired from SOEs are covered by the new pension system. However, pension payments are low, perhaps lower than the common pension rate in SOEs. Enterprises still have to pay the difference between the actual and common pension rate.
44. The survey found only a few cases in different cities of new owners complaining about the overvaluation of state assets.
45. Only face-to-face interviews were conducted but no questionnaires were distributed in this city.
46. Soft budget constraints result from the lack of discipline which derives, for example, from the unenforceability of bankruptcy, together with various subsidies, credits, and price supports provided by the state to SOEs. See Janos Kornai, Economics of Shortage (Amsterdam: North-Holland Pub. Co., 1980);
47. Janos Kornai, "The Soft Budget Constraint", Kyklos, Vol. 39, No. 1 (1986), pp. 3-30.
48. M. Dewatripont and Eric Maskin, "Credit and Efficiency in Centralized and Decentralized Economies", Review of Economic Studies, Vol. 62, No. 4 (1995), pp. 541-55. Dewatripont and Maskin (1995) borrow the phrase "time-consistent policy" from macroeconomics. It refers to a situation where it would be optimal for the bank to impose tough financial discipline over the firm but, once the firm becomes insolvent, it becomes rational for the bank to issue more credit to enable the firm to bring back some returns.
49. Ross Garnaut, Ligang Song, Yang Yao and Xiaolu Wang, Private Enterprise in China, (Canberra: Asia Pacific Press 2001);
50. Neil Gregory, Stoyan Tenev and Dileep Wagle, China's Emerging Private Enterprises: Prospects for the New Century (Washington: International Finance Corporation, 2000).