As a results SOE’s have gone through a number of changes in order to help improve their competiveness. A major turning point in this history of SOE’s in China was 1979. This marked the beginning of the rural reforms in China. A dual
price system was implemented to help improve productivity and help stop any food shortages that were occurring. At this time the private sector also remerged. This had the affect of providing more Jobs in China and reducing unemployment. It has also created competition with SOE’s. SOE’s were forced to be more progressive and efficient in order to keep up with these private companies. They were forced to adapt more and respond better to providing products that the market desired. Failing to adapt to this type of economy would have caused SOE’s to become obsolete. The private sector growth has also helped push China towards a market system where prices are determined by market forces. Furthermore in 1985 this first phase of SOE reforms went even further to help improve the productivity of SOE’s. The control and government intervention on private business continued to decrease. This helped facilitate the privatization of many smaller SOE’s. The decentralization of state control also allowed business to be more free and independent in exploring way to improve the economic competiveness. Firms were also allowed to sell products produced outside of there production quota above the market price. Firms were also given more independence to hire and fire staff and to provide bonuses This helped to improve productivity as firms were given more autonomy to make profit growing decisions and to provide more incentive to its employees to work more efficiently. The second phase of SOE reform included the corporatization of SOE’s in 1992. This began due to the slowdown of SOE reform due to doubt about the economic and social impact of it. Underperforming enterprises were allowed to completely overhaul their structure. There was a greater focus put on performance, which further helped firms improve their efficiency and productivity. In 1990 and 1991 the Shenzhen and shanghai stock exchanges were opened. This allowed a limited number of SOE’s to issues shares to the public. This was also later followed by a large increase in the privatization of firms. Private firms began to increase dramatically as a percentage of GDP. While these reforms dramatically improved economic performance it also meant that many SOE’s employees lost their jobs creating many social problems in the process. Another major reform that took place in China affecting SOE’s was the banking 1979. Before this reform there was only one state owned bank instead of the 3 that were implemented this year. These banks were the Agricultural bank of China, the bank of China and the China Construction Bank. However later in 1984 a fourth State owned bank was set up the ICBC. Later more banks were also set up however SOB were a dominant force in the banking sector in China
You've reached the end of your free preview.
Want to read all 6 pages?
- One '13
- World Trade Organization, Public company, People's Republic of China, Nationalization, Government-owned corporation