Under New Ownership: Privatizing China's State-owned Enterprises

CONTENTS......Page 5
Preface......Page 9
Abbreviations and Acronyms......Page 13
1 China’s Industrial System: Where It Is Now, Where It Should Be Headed, and Why......Page 15
The Changing Economic Landscape since 1979......Page 17
The Impact of Reforms on Productivity and Growth......Page 19
How Firms Can Succeed under the New Competition......Page 34
Privatization: Wisdom from Experience......Page 51
A Brief Overview of the Study......Page 54
2 Reform in China, 1978–97......Page 59
The Pre-Reform Industrial System......Page 60
The First Step to Industrial Transformation......Page 65
The Industrial Reform Initiatives, 1984–9......Page 69
Renewal of the Reform Drive, 1992–7......Page 83
What the First Round of Reforms Achieved......Page 89
3 The Accelerated Change in Enterprise Ownership, 1997–2003......Page 91
The Decision to Join the World Trade Organization......Page 96
Corporatizing Chinese State Enterprises......Page 100
The Formation of Business Groups......Page 104
The Emergence and Significance of Nonstate Firms......Page 110
Missing Market Institutions: The Weak Legal System......Page 116
The Consequences of Reforms during 1997–2003......Page 119
4 Chinese Ownership Reform in the East European Mirror......Page 129
Industrial Reforms in Eastern Europe......Page 130
Lessons from Eastern Europe......Page 134
What China Can Learn from Other Transition Economies......Page 145
A4.1 Selected Literature on Transition Economies......Page 148
5 Assessing the Effects of Ownership Reform in China......Page 165
Reform in the Chinese Urban Context......Page 166
5.2 Share of SOEs in Beijing, Chongqing, Guangzhou, Shanghai, and Wuhan, 2003......Page 168
Empirical Methodology......Page 180
Policy Measures......Page 183
Selection Bias......Page 190
Empirical Tests and Findings......Page 196
Role of Institutions and Management......Page 204
5.30 Effects of Different Variables on Productivity......Page 221
6 Making Privatization Work......Page 227
Taking Stock of China’s Privatization......Page 229
Assessing Gradualism......Page 232
Conglomerate Group Formation as an Interim Strategy......Page 233
Medium-Term Policy Objectives......Page 236
Market Environment and the Role of the State......Page 237
Industrial Consolidation......Page 241
Competition Policy......Page 243
Corporate Governance......Page 248
Innovation Policy......Page 250
Conclusion......Page 251
References......Page 255
Index......Page 279
About the Authors......Page 297
1.1 Misallocation of Capital......Page 31
2.1 Chinese Industry Output Shares by Ownership Type, 1978–97......Page 74
2.2 Increases in China’s Bank Loans and the Money Supply......Page 88
3.1 State-Owned Enterprise Profits, Taxes, and Losses......Page 92
3.2 Ownership Share......Page 101
3.3 Share of Establishments......Page 102
3.4 Foreign Direct Investment, by Country......Page 113
3.5 SOE and Non-SOE Profit Rates......Page 122
3.6 Energy Use per Unit of Industrial Output......Page 125
5.1 Average Value Added per Worker in 2001, by City......Page 176
5.2 Average Value Added per Worker in 2001, by Sector......Page 179
5.3 Average Profit per Worker in 2001, by Sector......Page 194
5.4 Average Profit in 2001, by Sector......Page 195
5.5 Value Added per Employee, 1996–2001......Page 199
1.1 Percentage Contribution of Total Factor Productivity to Growth......Page 20
1.3 Contributions to TFP Growth......Page 21
1.4 Incremental Capital-Output Ratio, Selected Countries......Page 22
1.5 Productivity Dynamics......Page 23
1.6 Cyclical Behavior of Total Factor Productivity......Page 29
1.7 Modes of Restructuring for Small and Medium-Size SOEs......Page 30
3.1 Share of China’s State-Owned and State-Holding Enterprises......Page 94
3.2 Number of Chinese Enterprises......Page 107
3.3 Industry Concentration Ratio in East Asia......Page 109
A4.2 Selected Literature on Nontransition Economies......Page 155
A4.3 Selected Literature on China......Page 159
5.1 Share of City GDP to National GDP, 1999 and 2003......Page 167
5.3 Distribution of Firms across Sectors, 1996–2001......Page 169
5.4 Distribution of SOEs by City and Sector, 1996–2001......Page 170
5.5 Comparison of LLCs and LLSCs......Page 171
5.6 Distribution of Non-SOEs by City and Sector, 1996–2001......Page 172
5.7 Average Size of Firms by City and Sector, 1996–2001......Page 173
5.9 Fixed Assets per Employee, by City and Sector, 1996–2001......Page 174
5.10 Value Added per Employee, by City and Sector, 1996–2001......Page 175
5.12 Number of Reforms Implemented, by City and Sector, 1996–2001......Page 177
5.13 Average Value Added per Employee of Reformed SOEs, by City and Sector, 1996–2001......Page 178
5.14 Appointment of Managers and Board of Directors by the State, by Enterprise Type, City, and Sector......Page 188
5.15 Selection Criteria......Page 192
5.16 Basic Regression Results......Page 197
5.17 Regression Results on Ownership......Page 201
5.18 Panel egression Results......Page 202
5.19 Panel egression Results with Relative Times......Page 203
5.20 Regression Results on Various Institutional Factors......Page 205
5.21 Regression Results on Manager Incentives......Page 209
5.22 Regression esults on Shareholder Meetings......Page 211
5.23 Regression Results on Board of Directors......Page 212
5.24 Regression Results Using Reformed SOEs Data Only......Page 214
5.25 Turnover of Managers......Page 215
5.26 Source of Expected Assistance, by City, Sector, and Type of Reformed SOE......Page 217
5.27 Estimation on Soft Budget......Page 218
5.28 Estimation on State and Bank Assistance......Page 219
5.29 Expectation of Assistance from State and Bank, by Firm Type......Page 220
5.31 Reasons for Not Restructuring SOEs, by City......Page 225
5.32 Reasons for Not Restructuring SOEs, by Sector......Page 226
6.1 Top 30 Selected Major Manufacturing Companies in China, 2002–3......Page 244