Meeting the Challenge of Chinese Enterprise Reform

How are China's state-owned enterprises doing in the 1990s? Evidence from three interior provinces

“…For instance, the ratio of the share of total SOE losses to the share of national industrial output by province is above one in 15 provinces, of which 6 are located in the Northeast and another 6 in the West or Southwest (Broadman, 1995). All three provinces hosting the present enterprise sample belong to this group, the ratios being 1.6, 1.9, and 1.2 in Shanxi, Jilin, and Sichuan respectively.…”

“…As Raiser (1996) shows, these structural legacies combined with a distortionary system of inter-provincial fiscal transfers have prevented the convergence of per capita incomes among interior provinces and thereby have accentuated the existing income gap between the coast and the interior. Source: Naughton (1996Naughton ( : 1090SSB (1991;1995).…”

“…Note that growth rates are given both at constant prices as published by the State Statistical Bureau (SSB, 1991;1995) and at current prices deflated by the national industrial producer price index, also published by SSB (various issues). Growth at constant prices is on average about 3 per cent per annum above growth at current prices deflated with the official price index.…”

“…8 The introduction of new corporate governance structures thus does not guarantee a real change in the operating environment of the enterprise concerned (see also Broadman, 1995). Indeed, selection for an experiment in a new form of enterprise-government relations suggests that the enterprise chosen already is a an above average performer benefiting from particular attention but correspondingly suffering from substantial interference from the central and provincial governments.…”

“…More recently, those finding were contested in a series of enquiries starting with Chen et al (1988) which revealed substantial efficiency improvements in China's SOEs over the 1980s (Jefferson, Rawski and Zheng, 1992;Groves et al, 1994; for surveys of that literature see Wu, 1993;Raiser, forthcoming). However, this optimistic assessment has not remained unchallenged either, as China's SOEs have produced growing losses and arguably have become a financial burden for the rest of the economy Broadman, 1995;Bouin, 1996). The optimists counter that SOEs overstate losses in order to evade taxation and that declining profits are a result of growing competition on the domestic market and are not necessarily a general concern, albeit an urgent fiscal problem (Sicular, 1994;Jefferson and Rawski, 1994).…”