Chinese-style Privatization: From Political Taboo to Incrementalist Reform

Beginning in 1978, China's industrial revolution has progressed for several decades. There are generally two phases of China's industrial reform: first during the 1980s, China did not privatize significant numbers of state-owned firms; secondly after the mid-1990s, China launched the second wave of industrial reforms, featuring privatization and corporatization. Especially in the realm of State Owned Enterprises (SOEs) reform, after 1997's 15th Congress of the Communist Party, the "mainstream" of SOEs reform was "grasping the large, and letting the small go", namely to reorganize large SOEs to become even larger and more competitive groups, and to privatize middle and small SOEs at the time. Yet what caused the large scale privatization? Has it improved SOEs performance, and what are its negative impacts? What is the future of the policy? All remains very complicated. In this paper, I'll focus on the analysis of privatization of small and medium sized SOEs. The following sections will be organized as: section 2 will discuss problems prior to privatization and its process; section 3 will examine why China's privatization took the form it did; section 4 will evaluate the policy and the following section will point out the reason why it is insufficient or ineffective; the last section will offer some feasible policy recommendations