Privatization, Chinese-style: economic reform and the state-owned enterprises

This article reviews 'corporatization' and 'marketization', shorthands for privatization, in the Chinese economy. In particular it concentrates upon the most recent round of state-owned enterprise reforms, the Modern Enterprise System and Group Company System, aimed at transforming China's largest state-owned enterprises into internationally competitive corporations. This represents a partial privatization, given that the state will retain majority ownership, while acquiring domestic and foreign capital via sharelistings and foreign and domestic joint ventures.
Drawing upon interview material from a five-year study of state-owned enterprises, the authors will indicate that such part privatization has been pragmatic and relatively slow. It has been constrained and circumscribed by broader economic and social reform programmes and accompanied by political decentralization and reforms. Ultimately, the reform and pace of reform is shaped by the desire to avoid political and social unrest which could, potentially, threaten the harmony of the Chinese central state apparatus.