Corporate governance of state-owned enterprises in China

Abstract

In the last thirty years, China has undergone three stages of corporate governance mechanisms, namely, (1) the “power-delegating and profit-sharing” system; (2) the “contracted managerial responsibility” system; and (3) the corporatization of large stateowned enterprises (SOEs). This paper will explore each mechanism, their advantages and disadvantages in detail. The main finding is that the various practices of corporate governance of SOEs are not suitable for China’s SOEs mainly due to the lack of sufficient incentive. Instead, a mixed mechanism of the “control-based” and the “marketoriented” mechanisms is more attractive given China’s unique institutional setting