SOEs sell product in excess of the quotas allow economy to grow out of planned

Soes sell product in excess of the quotas allow

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SOE’s sell product in excess of the quotas, allow economy to grow out of planned o SOE Reform through contract responsibility system Expand enterprise autonomy and increase profit incentives 1984 – SOE autonomy expanded but still limited and profit retention negotiated annually 1987 – profit agreements last 3 years – delegated control rights to managers 1989 – almost all SOE’s followed new profit system o Financial Reform Move from one bank to a central bank and 4 sub banks People’s bank of China (PBOC) central bank Ag. Bank of China (ABC) Industrial and Commercial Bank of China (ICBC) People’s Construction Bank of China (PCBC) Bank of China (BOC) for foreign exchange business Banks remain highly specialised but have diversified since 1984 o Entry and Expansion of Non-SOE’s Private = non-collective Stronger internal incentive and tighter budgets Benefit from the range of economic and financial reforms at the time Fiscal decentralisation = incentive to promote private sector = taxes Black markets became legal = help fiscal position 1984 – commune and brigade enterprises township and village enterprises (TVE’s) strong support for rural industrialisation due to importance to rural industry 1983-3988 rural enterprise output increased 5x 3 – Retreat and Revival Reform (1989-1993) - 1988 – corruption and inflation + Tiananmen square massacre (TSM) backlash = econ reform on hold - 1989-1990 = austerity measure to prevent over-heating economy, credit cuts hurt Ag. sector - 1990 – efforts to re-collectivise Ag., re-centralise investment and financial power - GEP slows down to 3.9% in 1990 – spark Southern Tour - Southern Tour – Deng, 1992, Jan and Feb tipped the political balance, reform reach a new high in 1992 - Phasing out planned prices o Tight MP led to market price level decline in 1990, gap between planned and market falls o Fast liberalisation after TSM o 1993 – dual pricing end for industrial products - Further opening up
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o 1992 – coastal cities given special privileges, Shanghai given even more autonomy o real estate boom consequence of increase in development zones designed to attract FDI o autonomy = tax benefits without central govt. approval - SOE Reform o TSM didn’t interrupt o 1992 – regulation to grant enterprise managers control over foreign trade, investment, labour, wages, etc. - Rural Enterprises as an engine of economic recovery o 1989-1990 3M rural enterprises go bankrupt o reverse trend of expansion more than 10 years o market orientation led to faster recovery, employment increase 10% & 17% in 1992 and 1993 with even larger increases in economic recovery Second stage of transition (1994 - now) - reform driven by non-state sector - 1984 – state industry central to Chinese economy - end 1993 SOE no longer majority of economy (1978 = 78%, 1993 = 43%) - support for reform following rise in standard of living in last 15 years of reform - To achieve full market economy; 3 objectives o Strategic Move: set goal for a market system Evolutionary process with 4 key events Sept. 1992 – 14
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