Policies to Build National Champions: China’s ‘National Team’ of Enterprise Groups

By all accounts China has made outstanding economic progress since the 1980s. If China’s provinces were each considered individual nations, the twenty fastest-growing nations in the world from 1978–1995 would all be Chinese (World Bank, 1997: 2). It is sometimes argued that China’s rapid industrial development, the motor behind growth in this period, has been primarily as a result of the speedy proliferation of small enterprises. The powerful imagery of the healthy young shoots of small private enterprises pushing their way upwards in response to ‘sprinklings of market reform’ is an image that many observers hold dear. This interpretation considers China’s small enterprises the ‘foundation for recent growth’ (World Bank, 1997: 21). More recently, however, this view has been challenged by those who point out that although small enterprises have played a very important role in China’s recent industrial development, the large-scale sector, predominantly state-owned, has also been critical (Lo, 1997,1999; Nolan, 1996; Nolan and Wang, 1998). Among other things they show that the number of large and medium enterprises (LMEs) and their share of industrial output has increased significantly during the reforms. Furthermore, LMEs are found predominantly in key upstream pillar industries, often supplying smaller-scale enterprises with basic producer goods, or in industries with significant linkages. As well as this, despite being ‘parched by years of planning’, empirical evidence now also suggests LME productivity and financial performance has bettered that of the small-scale sector (Lo, 1999).