Editor's Introduction

After having decreased in the early 1980s, losses by Chinese industrial enterprises began to go up in 1985, reaching 4.05 billion yuan, an increase of 18.3 percent over 1984. In 1986, losses increased another 78.7 percent to 7.42 billion yuan, and in 1987 they increased another 16.9 percent to reach 8.47 billion yuan. These losses not only marked the most serious increase in enterprise losses since 1982, when enterprises had racked up 5.58 billion yuan in losses, but their pattern did not follow the pattern of past debt peaks. Previously, debt peaks had been associated with the slow downs that occurred periodically in China's industrial growth rate as authorities adopted tight monetary and credit policies to cool off an overheated economy. This pattern held in 1986, as the industrial growth rate slowed from 18 percent to 9.2 percent. In 1987, however, the industrial growth rate climbed back to 14 percent, but enterprise losses continued to climb. This suggested a more complex and serious problem than encountered in the past.