Restructuring, productivity and technical efficiency in China’s iron and steel industry, 1988–2000

Abstract

Using a stochastic frontier model with panel data, this paper evaluates the impact of major reform initiatives on enterprise performance in China’s iron and steel industry. While the production possibility frontier of examined enterprises was shifting upward, their technical efficiency did not improve significantly, and was even deteriorating in the mid-1990s. Moreover, the largest steel enterprises did not have a pronounced efficiency advantage over smaller ones, even though the former are considered by the Chinese authorities as the core of ongoing centralized merger campaign to create internationally-competitive steel conglomerates. The paper examines various determinants of enterprise inefficiency, and discusses policy implications of major findings.