In the recent decade China witnessed an upsurge of privatization of small and medium state-owned enterprises (SOEs). In contrast to the consequent sharp reduction in the number of firms, however, the estimated share of broadly-defined SOEs that includes limited liabilities companies controlled by the State has shown virtually no sign of decline. We explain the backgrounds of this seemingly paradoxical persistence of state-ownership by looking into two distinctive types of large SOEs: traditional SOEs that remain dominant in oligopolistic industries and manager-controlled SOEs surviving in competitive industries. The two types exemplify several factors constraining further progress of SOE reform such as, financing the costs of restructuring, redefining the role of the State as the single dominant shareholder, and balancing the interests of the State and managers as entrepreneurs. Sorting these issues out will take time, which means that instabilities associated with state corporate ownership will remain in place in the foreseeable future in China.
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Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number
64.
Length: Date of creation: Jun 2006 Date of revision: Publication status: Published in IDE Discussion Paper. No. 64. 2006.6 Handle: RePEc:jet:dpaper:dpaper64
Find related papers by JEL classification: L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
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