Reforming the State-Enterprise Property Relationship in the People\u27s Republic of China: The Corporatization of State-Owned Enterprises

Part I of this Note first describes the problems that have prodded China to restructure its SOEs and then explains the root of those problems - the state-enterprise property relationship. This part concludes with a description of the unsuccessful attempts to date to reform that relationship. To understand why these efforts have met with little success, Part II explores the way in which most transition economies have attempted to address the ambiguity in the state-enterprise property relationship, by abolishing it through privatization. Although privatization is neither economically nor ideologically suited to China, experience with privatization does hold one lesson for China\u27s restructuring effort: real reform of the state-enterprise property relationship requires not only a change in the legal definition of that relationship but also a cultural transformation of the underlying expectations regarding ownership rights. Part III examines whether corporatization facilitates that cultural transformation. The Note concludes that corporatization attacks the immediate problems of the SOEs, and on paper helps delineate the respective property rights of the state and the SOEs, but in the end effects little shift in the culture of state intervention underlying the state-enterprise property relationship