The privatization of Chinese state owned enterprises: Developments from the perspective of the Chinese telecommunications industry

Having started in Great Britain in the late 1970s, privatization has swept rapidly across the world and become one of the most important business phenomena in the modern economy. Although the initial success in the privatization of state-owned enterprises (SOEs), such as increased profitability, improved economic efficiency and enhanced national welfare and growth, has motivated many governments to push the privatization process further, there is not a universal model for the privatization of SOEs to follow. However, a range of specific elements influence the likely success of privatization in individual countries, for example the legal framework, the level of competition, and the depth of capital markets. In China, with its vast territory, population and a diverse and still developing economy, the influence of these elements is amplified. This dissertation focuses on the Chinese telecommunications industry and explores how the privatization process will affect this industry. First, it reviews the relevant theoretical and empirical studies and examines the various elements that complicate the privatization process. It examines the reforms that have taken place in the Chinese telecommunications industry and identifies some important issues which may impede further reform. By examining the process and outcomes of the privatization of British Telecom, which like its Chinese counterpart was a monopolized industry, we are able to identify a range of important success factors, such as corporatization before privatization and the need for customised models of privatization, together with the importance of market and legal restructuring to foster a competitive environment during the process of privatization. Some recommendations for the Chinese telecommunications industry are outlined, which may also be applied to the privatization process in other developing economies