2 - The Evolution of China’s Reforms of State-Owned Enterprises (1978–2020)

Summary

Chapter 2 traces the contours of China’s SOE reform since 1978. We divided the reform into five phases, where the first two phases focused on ensuring the survival of SOEs by granting them operational autonomies, first at the firm level and then at the managerial level. The third phase saw the adoption of corporatisation strategies for the ones deemed promising and privatisation of the ones deemed unviable. The fourth phase covered the first decade after China’s accession to the WTO, where the earlier trajectories continued, as we can see in the efforts to continue the market-oriented reform for SOEs with plans of commercialisation and modernisation. At the same time, a worrying trend also started to emerge when the government launched various campaigns to create national champions. This trend continued in the fifth phase as we entered the new era of ’Socialism with Chinese Characteristics’, where SOEs, strengthened by the previous rounds of reforms, started to squeeze out private firms in various forms. At the same time, the CPC also stepped up its efforts to enhance its influence in the SOEs by launching aggressive drives to build Party cells in these entities.