Book•
China's Ownership Transformation: Process, Outcomes, Prospects
20 Jun 2005-
TL;DR: Li et al. as mentioned in this paper provided researchers, students, policymakers, and those interested in the emergence of China as a global manufacturing and economic powerhouse with in-depth information on the transformation of its state-owned sector.
Abstract: China's emergence as a global economic player has been accompanied by a major internal transformation. Over the past decade, the economy has made the transition from complete reliance on state-owned and collective enterprise to a mixed economy where private enterprise also plays a strong role. Gaizhi, a Chinese term meaning transforming the system,"" has become a major phenomenon in most parts of the country; in many cases it has involved full privatization. China's Ownership Transformation applies descriptive and econometric analysis to survey, and official statistical data to examine, the progress of gaizhi over the years and across regions. It discusses the main players in the process, their motivation and incentives, and looks at the forms, scope, and timing of gaizhi. The authors also provide an assessment of the outcomes of gaizhi, focusing on employee issues, corporate governance issues and frm performance. The book concludes with discussion of the issues related to the fairness and efficiency of the gaizhi process, particularly concerning the role of management buy-outs and outside investors. These issues are at the center of a lively public debate in China, which is likely to influence future Chinese policies toward gaizhi. This title provides researchers, students, policymakers, and those interested in the emergence of China as a global manufacturing and economic powerhouse with in-depth information on the transformation of its state-owned sector.
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TL;DR: The authors analyzes China's institution, a regionally decentralized authoritarian system where the central government has control over personnel, whereas subnational governments run the bulk of the economy; and they initiate, negotiate, implement, divert, and resist reforms, policies, rules, and laws.
Abstract: China's economic reforms have resulted in spectacular growth and poverty reduction. However, China's institutions look ill-suited to achieve such a result, and they indeed suffer from serious shortcomings. To solve the "China puzzle," this paper analyzes China's institution—a regionally decentralized authoritarian system. The central government has control over personnel, whereas subnational governments run the bulk of the economy; and they initiate, negotiate, implement, divert, and resist reforms, policies, rules, and laws. China's reform trajectories have been shaped by regional decentralization. Spectacular performance on the one hand and grave problems on the other hand are all determined by this governance structure. ( JEL O17, O18, O43, P21, P25, P26)
1,604 citations
Cites background from "China's Ownership Transformation: P..."
...The Shunde city government also encountered a serious debt problem when it privatized most of its state and collective firms in 1992 (Garnaut et al. 2005)....
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TL;DR: In this article, the authors consider an explanation for pyramids built by the state: separating firms from political interference and find that intermediate pyramidal layers insulate managers from a pyramid's top owners and hence induce agency costs, they also minimize political costs of state intervention.
Abstract: Pyramidal organizational structures are common throughout the world. This article considers an explanation for pyramids built by the state: separating firms from political interference. Although intermediate pyramidal layers insulate managers from a pyramid's top owners and hence induce agency costs, they also minimize political costs of state intervention. All else equal, the optimal division of power between the government and the managers should be the point at which the marginal agency costs are equal to the marginal political costs. Our empirical results, based on hand-collected data for 742 local government-owned Chinese business groups are generally in line with this hypothesis. (JEL: D21, D23, G32, L22, L32, P31). The Author 2012. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.
245 citations
Cites background from "China's Ownership Transformation: P..."
...This process typically occurs through several rounds of joint ventures established by SOEs and their subsidiaries with other government and SOE partners (Qian 1995; Tenev et al. 2002; Garnaut et al. 2005)....
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TL;DR: In this article, the authors argue for and find evidence that private firms located in higher social trust regions use more trade credit from suppliers, extend more trade credits to customers, and collect receivables and pay payables more quickly.
Abstract: State-controlled listed firms in China receive preferential treatment when borrowing from commercial banks; in contrast, private controlled firms rely on informal finance and on trade credit. We argue for and find evidence that private firms located in higher social trust regions use more trade credit from suppliers, extend more trade credit to customers, and collect receivables and pay payables more quickly. These findings are enhanced for firms located in provinces with weak protection of property rights. Our results are robust to different measures of social trust, legal environment, and endogeneity. Overall, our results show that social trust helps private firms overcome institutional difficulties in financing their activities.
216 citations
TL;DR: This article developed an integrated framework for understanding the entire history, including both the divergence and the recent convergent trend of China's long-term economic dynamics, and explained how deeply embedded political and economic institutions that contributed to a long process of extensive growth before 1800 prevented China from capturing the benefits associated with the Industrial Revolution.
Abstract: China’s long-term economic dynamics pose a formidable challenge to economic historians. The Qing Empire (1644 –1911), the world’ s largest national economy before 1800, experienced a tripling of population during the seventeenth and eighteenth centuries with no signs of diminishing per capita income. While the timing remains in dispute, a vast gap emerged between newly rich industrial nations and China’s lagging economy in the wake of the Industrial Revolution. Only with an unprecedented growth spurt beginning in the late 1970s did this great divergence separating China from the global leaders substantially diminish, allowing China to regain its former standing among the world’s largest economies. This essay develops an integrated framework for understanding that entire history, including both the divergence and the recent convergent trend. We explain how deeply embedded political and economic institutions that contributed to a long process of extensive growth before 1800 subsequently prevented China from capturing the benefits associated with the Industrial Revolution. During the twentieth century, the gradual erosion of these historic constraints and of new obstacles erected by socialist planning eventually opened the door to China’s current boom. Our analysis links China’s recent development to important elements of its past, while using recent success to provide fresh perspectives on the critical obstacles undermining earlier modernization efforts, and their eventual removal. (JEL N15, N45, O11, O47, P21, P24, P26)
171 citations
Cites background from "China's Ownership Transformation: P..."
...On state enterprise reform, see Holz 2003; Garnaut, Song, and Tenev 2005; Yusuf, Nabeshima, and Perkins 2006. industrial parks to attract overseas and domestic investors, loosened restrictions on overseas travel and study for its own citizens, encouraged Chinese firms to invest overseas, and…...
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01 Apr 2008
TL;DR: In this paper, the impact of China on the rest of the world and on the standard of living of its own people depends mainly on whether the nation continues to double the size of its gross domestic product (GDP) every seven to ten years or whether that growth slows markedly or even halts.
Abstract: Why attempt to forecast China's economic growth? Most importantly, the impact of China on the rest of the world and on the standard of living of its own people depends mainly on whether the nation continues to double the size of its gross domestic product (GDP) every seven to ten years or whether that growth slows markedly or even halts. China already influences the world economy through its booming exports, its demand for natural resources, its influence on global warming, and much else. A GDP four times the current level will multiply China's worldwide impact. But there is another reason why forecasting Chinese growth is desirable in a volume dedicated to understanding China's present and past economic performance. The ability to forecast is one important test of whether the analysis has gotten the story right. There are many ways to forecast the future, some of which, like simple projections of recent trends, tell us little about the present and not much about the future. But analytical forecasts based on a model that attempts to sort out the main influences that are likely to shape that future can deepen our understanding of the mechanisms driving Chinese growth. Even if the forecasts are a bit off the mark or downright wrong, a good model allows analysts to review a forecast's strengths and limitations and to identify specific shortcomings that contributed to the gap between predictions and ultimate outcomes.
158 citations