Editor's Introduction

This second volume of a two-part issue of >i>The Chinese Economy>/i>,* on China's state-owned enterprises (SOEs), presents three articles that reflect very different points of view on the reform of SOEs and can give the reader a sense of some of the practical difficulties involved in reforming these industries. The first article, by Yang Famin of the Shaanxi Provincial Propaganda Department, conveys a sense of the feelings of being wronged held by at least some officials, and one presumes Party cadres in SOEs, in that interior province. He reflects the feeling that SOEs have contributed the most to China over the past five decades and are now being cast aside as so much "baggage" that needs to be "thrown off." At the same time, he argues, somewhat disingenuously, that SOEs have made huge sacrifices for reform and opening up, and have willingly accepted competitive disadvantages in order to promote other sectors of the economy. For instance, he argues that in the 1980s, as the township and village enterprises (TVEs) were being developed, SOEs continued to sell their products cheaply, to pay higher taxes, and to subsidize nonâstate-owned enterprises with insurance and personnel resources, subsidies that enabled TVEs to grow quickly. He also argues that SOEs suffered the burden of price reform because TVEs were allowed to adjust their prices freely while SOEs had to keep their prices low to help fight inflationary pressures.