Fair competition review in China: examining progress after nine years

In China, as in the Soviet Union and Eastern Europe, economic reform initiatives seek to increase productivity by introducing elements of market-oriented policies and institutions into an economy formerly dominated by state planning. Efforts to evaluate the impact of reform of Chinese industry have focused on the measurement of productivity change in state enterprises. This study expands the prior framework of analysis in several directions. Our investigation of productivity trends is not limited to state enterprises but includes quantitative comparisons with China's fast-growing collective industries, which contributed 36% of overall industrial output in 1988.1 Unlike previous studies, our analysis works with gross rather than net output. This permits us to investigate changes in the productivity of intermediate inputs, which occupy a large portion of total costs in Chinese industry, as well as labor and capital. To do this, we develop a "quasi-frontier" estimation procedure which seems appropriate for comparisons of total factor productivity based on Chinese industrial data. Finally, we offer a quantitative perspective on the extent to which reform efforts have moved industrial resource allocation toward patterns expected of a market system. The analysis confirms our previous finding, based on a restricted framework employing only labor, fixed capital, and net output, that multifactor productivity in state industry has risen substantially during

This paper examines the mechanism of the organizational transformation of state-owned enterprises (SOEs) in economies undergoing transition from central planning to market orientation. It argues that the SOE transformation reflects the influence of three groups of factors: (1) the legacies of the past, embodied in the continuing influence of the state redistributive system, (2) the realities of the emerging markets, with their forces of legitimation and competition, and (3) the intraorganizational processes affecting the organization's propensity to change. The analysis is based on a population-level study of SOEs in the construction industry in two regions of the Russian Federation during the first five years of economic reforms (1989-1993) and focuses on the separation of the SOEs' structural units. The results show that the likelihood of transformation is negatively affected by the SOE's ability to procure resources from the state (as reflected in the enterprise status in the state redistributive hierarchy), has an inverted U-shape relationship with population density (indicating the influences of competition and legitimation), and is positively affected by the prior changes of the same and related types (as captured by the prior separations from the parent company and the prior leasing arrangement).

The Ethnic Minority‐Majority Income Gap in Rural China during Transition

December 01 2019 Summary of the General Discussion on “The Status of China's Market Economy and Structural Reforms: The Issues Behind the U.S.–China Trade War” Author and Article Information Online Issn: 1536-0083 Print Issn: 1535-3516 © 2019 by the Asian Economic Panel and the Massachusetts Institute of Technology2019Asian Economic Panel and the Massachusetts Institute of Technology Asian Economic Papers (2019) 18 (3): 57–58. https://doi.org/10.1162/asep_a_00717 Cite Icon Cite Permissions Share Icon Share Facebook Twitter LinkedIn MailTo Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation Summary of the General Discussion on “The Status of China's Market Economy and Structural Reforms: The Issues Behind the U.S.–China Trade War”. Asian Economic Papers 2019; 18 (3): 57–58. doi: https://doi.org/10.1162/asep_a_00717 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentAll JournalsAsian Economic Papers Search Advanced Search The discussion began with Gamini Herath suggesting that the author discuss the likely impact of the 2018 tariffs on China's growth trajectory; would the tariffs result in a shift in China's chosen growth path? Deborah Swenson wondered how China's state-owned enterprises (SOEs) are going to perform in more dynamic sectors like aerospace and if the Chinese government planned to treat SOEs and private enterprises equally, as suggested in the paper. She seemed skeptical of the Chinese government's declaration that it will no longer confer special favors to SOEs. “Can a tiger change its stripes?” she asked. Prema-chandra Athukorala sought clarifications on three points. First, he asked about the status of the U.S. acceptance of the market economy status of China. The United States had agreed to consider this in 2016 but it appears not to have been done. Second, he noted that no data on subsidies given to the SOEs... You do not currently have access to this content.

Naughton (2017) covers a lot of territory, with great authority, in what he modestly describes as a ‘preliminary appraisal’ of the current reforms of China's state enterprises. State owned enterprises (SOEs) are inherently difficult to analyze, even in the most transparent of societies, owing to the multiple, sometimes conflicting, objectives that governments impose on them. The key to understanding the Chinese reforms is in fact what Naughton terms the ‘impossible trinity’, as the government attempts to combine improved incentives, enhanced oversight, and new missions for its SOEs. Not surprisingly, therefore, Naughton concludes that the current wave of reforms, like those before them, is ‘deeply troubled’. Naughton's central theme is the multiplicity of reform objectives. These include three apparently core goals: corporatization of SOEs; their classification into ‘competitive’, ‘public service’ and ‘other’ categories; and strengthening the boards of directors. In addition, a further five objectives are mentioned, including managerial contracts, caps on managerial compensation, and the possibility of mixed ownership. In all countries where SOEs are present, these firms reflect the country's political history, especially in a country like China with its earlier phase of a centrally planned and controlled economy. The question is, what sort of role do they have in the transition from plan to market: do they exist mainly as vestiges of an earlier ideology, or as a vehicle for the Party to maintain its control over the economy (and associated rents), or for some broader developmental purpose? Naughton clearly illustrates the struggle, common to most countries with a sizeable SOE sector, to achieve a balance between commercial performance and political control. A sub-theme in Naughton is therefore the continuing search for a rationale for the SOEs, whether as sovereign wealth funds, technological innovators, development of ‘strategic sectors’, or broader developmental and equity goals. Naughton's Section 3 summarizes the key features of the SOE sector. The story is more or less as expected. The state sector is a shrinking share of the economy. While it employs just 13.5% of the industrial labour force, its share of industrial assets is more than double this figure. In other words, its operations are much more capital-intensive than the private sector. It would be interesting to know more about the services sector, especially finance and transport where the state presence in formerly communist economies is typically large. Naughton notes that there are significant, often opaque, entry barriers in these sectors. Moreover, being mostly non-tradables, there is not the discipline of import competition. We also get a picture of SOE performance from Naughton's Figure 3. The main conclusion here is that industrial SOEs have a rate of return on assets that is quite similar to, and appears to track, that of private firms. Given the constraints under which SOE's operate, this might appear surprising. But evaluating SOE performance on the basis of published financial data is inevitably highly problematic, as Naughton notes. There is typically a myriad of implicit (and sometimes explicit) subsidies and exactions and thus these comparisons can conceal as much as they reveal. Shifting from the positive to the normative, in a second-best world the major elements of an SOE reform package are typically transparency, hard-budget constraints and competition. That is, the public needs to have a full picture of their finances (both direct and implicit). SOEs need to have clearly prescribed fiscal constraints. And SOEs need to be exposed to level-playing-field competition, unless there are very carefully defined (and regulated) public service and/or natural monopoly considerations that dictate otherwise. All three recommendations are advanced in various sections of Naugton's paper. One paper cannot cover everything, especially such a vast and complex subject as this. Inevitably I have some additional queries. The first is situating the SOE sector in the broader Chinese economy. As the economy slows, and consumption becomes a more important driver, how will the role of SOE's evolve? Presumably, slower growth will increase the impetus for reform, as Naughton notes in passing. Second, how do SOE's connect to ongoing efforts to reform the financial sector, especially the ‘shadow’ banking sector? Presumably SOE's fund their businesses primarily through the formal, state-owned banking sector. It would be interesting to learn more about the relationship between non-financial SOEs and the SOB's – are the latter primarily a vehicle to underwrite the operations of the former? Moreover, connecting these two points, are SOE borrowings and leverage ever of such a scale that they could have the potential for macroeconomic destabilization? Third, what role do the SOE's play in the internationalization of the Chinese economy? Have they been major players in the outward orientation of Chinese firms? My impression is that they have been in a few sectors, such as natural resources and construction. Fourth, and related, what role do the SOE's play as technological spearheads and drivers of China's modernization? This is a common objective for SOE's in developing countries but, judging from the author's brief remarks (and other recent research, for example, Yip & McKern, 2016), China's SOE's appear to rarely perform this function.

DOI: 10.1355/ae23-2k China: Is Rapid Growth Sustainable? Edited by Ross Garnaut and Ligang Song. Canberra: Asia Pacific Press at the Australian National University, 2004. Pp. 249. This publication is partly based on papers presented at the China Update Annual Conference held in Canberra, in October 2004, organized by China Economy and Business Program and the Asia Pacific School of Economics and Government of the Australian National University. The book discusses some important issues surrounding China's economic growth and transition, especially after China's post-WTO era. These include domestic marketization and market integration, further reform of state-owned enterprises (SOEs), regional disparity and poverty reduction, financial market development, employment situation, and international trade. It is increasingly clear that the sustainability of its rapid economic growth has become a central concern for China. As shown in the book, economic growth has contributed significantly to the rising average standard of living and the reduction of poverty in the country. Continued economic growth is, therefore, essential to maintain social stability in China while the economy has been undergoing fundamental transformation. Moreover, China's rapid economic growth has been an important factor in recent years in the positive economic dynamism in Asia and in the world. As a result, the sustainability of China's economic growth has captured increasing attention from both within and outside China. The book is a much-welcome addition to the literature on China's growth and its sustainability. The opening chapter starts with a useful discussion on the origins of China's economic reform and the pressing challenges that China faces, including a flawed financial system, growing development gap, macroeconomic fluctuations, and problems with the international trading system. This provides readers with a general overview of not only China's past reform and performance but also the issues that needs to be addressed. The chapter also introduces and links the remaining chapters together. The following chapters focus on various issues considered central for China's sustainable growth. The first issue, China's market development, is discussed from various aspects in three chapters. Chapter 4 focuses on the grain market. Chapter 8 on the labour market, and Chapter 7 on marketization in general. Chapter 4 gives a thorough and insightful overview of China's domestic grain market development. It concludes that after twenty-five years of effort, reforming China's grain market has been reformed with a substantial degree of success. However, many features of the centrally planned system have survived till today, which suggests the difficulties still facing full marketization of the sector. On the labour market, Chapter 8 finds some evidence of increasing labour market integration and that the non-state sector played a major role in facilitating the process. The chapter suggests that China's gradualist approach, where the state sector was gradually liberalized and restructured, and nonstate sector greatly encouraged, helped to develop a unified labour market. Chapter 7 depicts a positive general assessment of China's overall marketization process, while recognizing areas for further improvement. One valuable insight is that regional development and the degree of marketization were positively correlated across provinces. Overall, though, there are plenty of room for further improvement. Another area of emphasis is the growing gaps in development and in income, both inter-regional and inter-personal. Chapter 9 takes the issue of regional policy and economic growth, giving particular attention to the recent campaign to develop China's western inland region. The chapter discusses the policy dilemma the Chinese government faces to narrow regional gaps while maintaining the growth dynamism of the east coast. It concludes that increased government investment and policies favouring the West are important but so far the impact has been limited. …

Fair Competition Review System and cross-regional capital flow: Evidence from China

State-owned enterprises (SOEs) in China pay higher wages than private firms. Is it because SOEs pay their workers wage premium or because they employ high-quality workforce? Using the latest methods and data, this paper accounts for the unobserved heterogeneity and estimates the SOE wage premium for the period 1995–2013. It is found that the wage premium has diminished since 1995 and has become insignificant since 2000. The significant wage gap between SOEs and non-SOEs can be explained by the fact that SOEs recruit high-quality workforce in correlation with SOEs’ industrial composition. This paper also evaluates the instruments used in the previous studies and rejects them through validity tests. The evidence suggests that the labour market in China is not segmented by ownership.

The inherent problems of state-owned enterprises (SOEs), such as the lack of external monitoring, may harm their accounting quality. However, the results from prior research are not consistent. Therefore, this study investigates the effect of state ownership of SOEs on accounting quality, measured by earnings management. Using the samples of listed SOEs in the A-share market in China from 2009 to 2017, the results indicate that there is a significant and positive relationship between state ownership and earnings management. Furthermore, the results show that higher competition within the industry can effectively inhibit the negative effect of state ownership on accounting quality. Interestingly, the positive relationship between state ownership and earnings management has weakened in recent years, suggesting that the recent mixed-ownership reform of SOEs is effectively working. Collectively, current study extends prior research by focusing on SOEs in a planned economy and by combining the mixed-ownership reform with earnings management. Consequently, this study provides practical implication to regulatory bodies by showing that state ownership plays an important role in the accounting quality of SOEs.

When China's leaders launched rural reforms in the late 1970s, they acknowledged the nation's need to modify its commitment to egalitarianism.1 Slogans such as Tt is glorious to be rich!' and 'Some areas will lead; others will follow!' signalled this fundamental shift in ideology. Leaders backed up these exhortations with a series of concrete policy actions ? establishing the Special Economic Zones and implementing the East Coast-first policy, introducing financial reforms, and initiating the rural industrialization movement. In China's version of the 'trickle down' theory, certain core areas were to take the lead in the modernization process and provide models for other areas to later emulate. Adopting strategies that had been employed

Taming the Chinese Leviathan: Is Antitrust Regulation a False Hope?

The article substantiates the need to improve the mechanism of corporate governance in stateowned enterprises as a competitive sector of the economy, which affects the investment climate and competitiveness of the national economy. Mostly, senior management is not interested in the development of the company because their salaries are low and they are often support rich people, who are only follow own goals such as raising of own profits. The financial performance of state-owned businesses has been analyzed, and many companies have been identified that have the production potential to thrive in the national market but are operating at a loss. All state-owned enterprises have common problems, which connect with employees, who don’t care about inner problems of the company and how they can solve them because of the lack of formed responsibilities and duties in the law. The community believes that institutions are controlling all activity of state-owned enterprises, but the gap in the law has a bad influence on results of the company. As a result, it was found that the tendency to close state-owned enterprises is caused by institutional problems arising from insufficient funding, uncompetitive salaries of senior management, a bad implementation of essential tasks from directors, corruption and lobbying of political parties or individuals in the system of corporate relations. In addition, the COVID-19 pandemic became one of the main reasons of liquidation of state-owned and private enterprises, which weren't ready for this new conditions. Governments of different countries tried to prevent a big financial crisis, but their actions and financial opportunities weren't enough to help enterprises to survive in harsh conditions. As a result, the financial situation of state-owned enterprises isn't acceptable and many of them don't even have money in order to pay salaries to their employees. Meanwhile, they have the production potential to prosper and to compete with other enterprises on the national and international markets. By the way, the legislative transformations of 2021, which aim to improve corporate governance at state-owned enterprises and to introduce foreign experience into the mechanism of corporate relations development, are studied. The directions of improvement of the mechanism of corporate management at the state enterprises are offered.

The article explores the digital transformation of State-Owned Enterprises (SOEs) through a bibliometric analysis. The study analyses the scientific literature to understand the current trends, challenges, and emerging themes surrounding the digitalization of SOEs across various industries. Digital transformation, which involves integrating technologies like AI, IoT, and big data, is crucial for improving operational efficiency, reducing costs, and ensuring sustainability in such key sectors as energy, transportation, and telecommunications, where SOEs often play a pivotal role. The research uses bibliometric tools, specifically Scopus and the Biblioshiny App, to map out the literature on digital transformation in SOEs, analyze keywords, and identify thematic clusters in the body of research. The study highlights the significant publication growth, particularly from 2018 onwards, and points to digital transformation, corporate governance, and green innovation as dominant research themes. These themes illustrate how SOEs leverage digital technologies to improve service delivery, increase transparency, and meet environmental targets. The study observed a rapid increase in research output related to SOE digital transformation, particularly from 2020 to 2023. The leading contributors were journals such as Finance Research Letters, Sustainability (Switzerland), and Technological Forecasting and Social Change. The central themes of the analyzed publications included digital transformation, corporate governance, green innovation, and environmental performance. These were classified as “motor themes” due to their high centrality and well-developed nature, indicating their pivotal role in SOE research. The analysis revealed strong links between keywords such as digital transformation, information asymmetry, and innovation. These connections highlight the critical role of digital technologies in enhancing transparency, efficiency, and sustainability within SOEs. The study reveals that the digital transformation of SOEs is a critical area of research, with a growing emphasis on sustainability and innovation. The analysis underscores the need for further studies on the financial impacts of digitalization, the role of government policies, and cross-country comparisons to fully understand how different regulatory and economic environments influence the digital transformation processes in SOEs. By leveraging emerging technologies, SOEs can better align with national digital strategies and contribute to broader policy goals such as energy efficiency and inclusive growth.

The Impact of Government Policies on Industrial Evolution: The Case of China's Automotive Industry

In recent years, organizations across myriad industries have begun adopting novel digital technologies and, in doing so, fostered their digital transformation. This study examines the digital transformation in state-owned enterprises (SOEs) in China. We conducted comparative case studies on China Mobile and China Unicom, two typical and leading SOEs in China's telecommunications industry, to identify the company's transformation characteristics and how key factors impact the transformation process. This research also contributes to digital transformation literature and to the institutional theory. We develop a conceptual framework for analyzing enterprise digital transformation, and generate some theoretical prescriptions. The research findings conclude that, based on innovation in digital technology by generations, enterprise digital transformation on strategic positioning, value proposition (services and products), and value creation (assets and organizational structure) presents a process by stages; both institutional pressures and technological attraction impact how SOEs carry out digital transformation; different SOEs with different characteristics in value creation present different transformation process. Future research could use the framework as an analytical tool and draw upon the theoretical prescriptions to examine digital transformation in different kinds of organizations. At last, this research also offers practical insights for SOEs to carry out digital transformations and for governments to offer supportive institutional environment for this process.