Market-Oriented Reform of State-Owned Enterprises in Mainland China

Abstract

In contrast to other socialist countries which opted for radical privatization, mainland China`s economic reform has been incremental and focused on ``marketization`` of the economy. Attempts have been made to reform the state sector of the economy without interfering with the existing ownership system. However, these reforms have resulted in a serious drain on state assets and poor economic results among state-owned enterprises. In an effort to solve these problems, Beijing introduced reforms in 1994 designed to convert larger state-owned enterprises into modern companies with property rights. In addition, a number of experimental reforms have been implemented to push state-owned firms into the market, including the formation of joint stock and limited liability companies, management by foreign investors, emulation of foreign invested enterprises, leasing out enterprises, leasing out mortgaged enterprises, and selling off state enterprises to private entrepreneurs. However, unless the property rights issue is further clarified, the outlook for the state sector in mainland China is anything but bright.