On Privatisation and Property Rights: Should China Go Down the Road of Outright Privatisation?

Abstract

Fierce debate is ongoing in China concerning the appropriate role for the private sector in the current stage of reform and enterprise restructuring. There are many economists, both within China and without, who argue that China should now increase both the scale and pace of privatisation and reduce the barriers to private sector involvement in the remaining large-sized State-Owned Enterprises as a matter of urgency. This paper argues, however, that on both theoretical and empirical grounds, wholesale privatisation in China should not be adopted, that ‘fuzzy’ property rights have served China well in the last twenty years of reform and that the appropriate boundary between the public and private sectors should be drawn pragmatically and on a case-by-case basis.