Chinese Enterprise Reform as a Market Process
AbstractThe reform of China's enterprise system increasingly reflects the outcome of China's emerging property rights market. We distinguish between a centrally-directed reform strategy, with characteristics similar to those of a Pigouvian tax, and a market-driven reform process, which captures the essential features of a Coasian approach to social cost. The Coase Theorem postulates that eliminating transaction costs and attaching well specified property rights to public goods that generate externalities will allow uncoordinated economic agents to negotiate institutional arrangements that produce socially efficient allocation of resources. Extending Coase's reasoning to the case of socialist transition ' we argue that reforms that expand competition, move toward well-specified assignment of ownership rights to public enterprises, and reduce transaction costs will motivate the "ultimate" owners, including officials of national and sub-national government agencies, to reconfigure their assets or to combine their assets with those of other jurisdictions and/or private investors to create more efficient ownership arrangements. We review the extent to which China's reforms have established the conditions for an effective market in ownership rights to industrial property. We tabulate progress from 1 980 to present along the three major analytic dimensions inherent in Coase's analysis: competition, property rights, and transaction costs. We conclude that the sheer size and diversity of China's industrial economy will motivate a continuation of decentralized reform initiatives. To support this Coasian reform process, central and provincial governments need to expand initiatives to clarify property rights, particularly the right of alienation, reduce impediments to competition, and facilitate the reduction of transaction costs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 76.
Date of creation: 01 Jul 2000
Date of revision:
Contact details of provider:
Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109
Phone: 734 763-5020
Fax: 734 763 5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
China; ownership; property rights; Coarse theorem; transition; merger; transaction costs;
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jefferson, Gary H, 1998. "China's State Enterprises: Public Goods, Externalities, and Coase," American Economic Review, American Economic Association, vol. 88(2), pages 428-32, May.
- Stanley Fischer & Alan Gelb, 1991. "The Process of Socialist Economic Transformation," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 91-105, Fall.
- Gary H. Jefferson & Thomas G. Rawski, 1994. "Enterprise Reform in Chinese Industry," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 47-70, Spring.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron).
If references are entirely missing, you can add them using this form.