With support of company law all three types of business can compete in the

With support of company law all three types of

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With support of company law, all three types of business can compete in the Chinese economy o Many traditional SOE's lost their market control and bargaining power o Many traditional SOE's lost their control of the company itself as a result of foreign investment - GFC o Had negative effect on foreign invested industrial output in China o Because foreign investment declined significantly 37
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Ownership Changes: Total Sales - Substantial increase in total sales of private firms o Replacement effect of decrease in SOE's - Foreign investment falls following GFC - Private firms not drastically affected by GFC o Steep-Flat-Steep GFC Asset acquisition Product upgrades Ownership Changes: Total Employment - Substantial decrease in SOE employment o Prime minister conducted lay off workers policy from 1998 o After 2008 most problems solved by central and local government Although some employees could not find an appropriate job in SOE Found jobs in in private firms and foreign invested firms o For a relatively low price 38
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SOE Reform - 1978-1984 o “Incentivisation” Management autonomy Replacement of profits by taxation - 1985-1992 o “Separating managerial and ownership rights” Enterprise bankruptcy law 1985 Joint stock system reforms in collectives and SME's - 1993-2002 o SOE --> Corporisation Company Law Property rights Modern corporation system Survival of fittest Bankrupt projects closed down and bad performing loans written off - 2003-2013 o Introduced board of directors Separating core business from sideline business o Introduced asset supervision and administration commission SASAC o Over 110,000 SOEs 113 Central SOEs 39
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Different Types of SOEs in China Today - Central SOE's o Exposed to stronger transitional pressures from home and host governments than local SOE's o More institutional support o Higher tax o Under direct control of State owned assets Supervision and administration Commission of the national state council - Local SOE's o Fewer obligations to serve national strategic prerogatives Thus greater managerial autonomy greater market orientation Their strategies are more focused on consumers But lower levels of monopolistic behaviour o Less funding from govt o Lower tax rate o Under direct control of provincial and municipal governments - Non-Financial SOEs o Any government owned corporation that primarily produces goods or non - financial services - Financial SOEs o Any government owned corporation that provides financial services 40
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Problems of SOEs Today - High debt to asset ratio o High levels of interest payments - Agency problem o Managers are agents for stockholders and are tempted to act in their own interests rather than maximizing value o Top managers care more about their job security They want to maximise sakes/profits/revenues etc Not necessarily concerned about increasing shareholder value o SASAC also have the authority for daily operations of the business
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  • '18
  • YI LI
  • Government, People's Republic of China, Planned economy

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