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Privatisation or Competition? A Lesson Learnt from the Chinese Enterprise Reform

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  • Liu, Guy Shaojia
  • Garino, Gaia

Abstract

Market competition is essential for any economy to be efficient. In order to develop competition in a transition economy, it is conventionally thought that privatisation should take place first. This wisdom has been challenged by the Chinese reform experience of the last two decades, which modified the incentive structure of state enterprises and created markets and market competition in the absence of large scale privatisation. China's experience, however, raises the question of whether its chosen type of reform is sufficient to promote competition in a market dominated by public firms. To answer this, we need to know what kind of markets were created--regional markets closed to trade or unified markets with easy access--and whether or not improved incentives for state firms have led to competition. This paper investigates these questions on the basis of a survey of both theory and empirical evidence; and finds that the Chinese reform policies did succeed in stimulating competition among state firms. Copyright 2001 by Kluwer Academic Publishers

Suggested Citation

  • Liu, Guy Shaojia & Garino, Gaia, 2001. "Privatisation or Competition? A Lesson Learnt from the Chinese Enterprise Reform," Economic Change and Restructuring, Springer, vol. 34(1-2), pages 37-51.
  • Handle: RePEc:kap:ecopln:v:34:y:2001:i:1-2:p:37-51
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    Cited by:

    1. Liu, Guy S. & Sun, Pei & Woo, Wing Thye, 2006. "The Political Economy of Chinese-Style Privatization: Motives and Constraints," World Development, Elsevier, vol. 34(12), pages 2016-2033, December.
    2. Liu, Guy S. & Sun, Pei & Wing Thye Woo, 2007. "What motivates and constrains politicians to privatize? The case of China," Economics Letters, Elsevier, vol. 97(1), pages 81-86, October.
    3. Guy Shaojia Liu & Haiyan Song, 2003. "A Dual-Price Demand Theory for Economies under Transition," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 1(2), pages 185-203.
    4. Li, Ke, 2007. "Transaction cost, corporate governance and division of labor--A general equilibrium analysis of professional managers and its implication to China's practice," Research in International Business and Finance, Elsevier, vol. 21(3), pages 447-468, September.
    5. Liu, Guy Shaojia & Woo, Wing Thye, 2001. "How will ownership in China's industrial sector evolve with WTO accession?," China Economic Review, Elsevier, vol. 12(2-3), pages 137-161.

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