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From Federalism, Chinese Style to Privatization, Chinese style

Author

Listed:
  • Yuanzheng Cao
  • Yingyi Qian
  • Barry R. Weingast

Abstract

In 1994 China began a profound reform of its state-owned enterprises. We first describe and characterize this progress in two areas: privatization of small state-owned enterprises at the county level and mass layoffs 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, federalism, Chinese style, has induced privatization, Chinese style.

Suggested Citation

  • Yuanzheng Cao & Yingyi Qian & Barry R. Weingast, 1997. "From Federalism, Chinese Style to Privatization, Chinese style," William Davidson Institute Working Papers Series 126, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:1997-126
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    JEL classification:

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

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