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From Federalism, Chinese Style, to Privatization, Chinese Style

Author

Listed:
  • Cao Yuanzheng,
  • Qian, Yingyi
  • Weingast, Barry

Abstract

In 1994, China began a profound reform of its state-owned enterprises (SOE). We first describe and characterize this progress in two areas: privatization of small state-owned enterprises (SOEs) at the county level and mass lay-offs of excess state workers at the city level. Local governments have initiated these reforms, which are proceeding in economically and politically sensible ways. We then argue that privatization, Chinese style, rests on an adequate economic and political foundation – federalism, Chinese style. We suggest a range of incentives that propel local governments toward SOE reform, including their harder budget constraints and increased competition from the non-state sector. In this sense, Chinese style federalism, has induced Chinese style privatization.

Suggested Citation

  • Cao Yuanzheng, & Qian, Yingyi & Weingast, Barry, 1998. "From Federalism, Chinese Style, to Privatization, Chinese Style," CEPR Discussion Papers 1838, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1838
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    References listed on IDEAS

    as
    1. Yingyi Qian, 1996. "Enterprise reform in China: agency problems and political control," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(2), pages 427-447, October.
    2. Yingyi Qian & Barry R. Weingast, 1996. "China's transition to markets: market-preserving federalism, chinese style," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(2), pages 149-185.
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    More about this item

    Keywords

    China; Federalism; local governments; Privatization; Restructuring;

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • P2 - Economic Systems - - Socialist Systems and Transition Economies
    • P5 - Economic Systems - - Comparative Economic Systems

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