Reforming the governance structure of China's state‐owned enterprises
| Author | Geng Xiao |
| DOI | http://doi.org/10.1002/(SICI)1099-162X(199808)18:3<273::AID-PAD17>3.0.CO;2-T |
| Published date | 01 August 1998 |
| Date | 01 August 1998 |
Reforming the governance structure of China's
state-owned enterprises
GENG XIAO*
University of Hong Kong
SUMMARY
Over the last 20 years, China's state-owned enterprises have been the subject of signi®cant
reform. As discussed in this article, they were previously state-run work units within the
centralized governmental hierarchy, but in recent years they have been transformed in such a
way as to have a recognized legal personality. Provision has also been made for them to be
reconstituted as modern corporate entities under the Company Law (whichcame into eect in
1994) and to become an integral component of an appropriately organized system of state asset
management. Progress has been slow in this regard, but some positive developments have
occurred and, in late 1997, the door was ocially opened for some of them to be partially or
even fully divested. #1998 John Wiley & Sons, Ltd.
INTRODUCTION
At the start of market-oriented reforms in 1978, state-owned enterprises and urban
collectively owned enterprises were basically the only two categories of enterprises
in the People's Republic of China (PRC). The state-owned enterprises produced
77.6% of the industrial output and the urban collective enterprises produced the rest.
By 1996, after almost 20 years of reforms, the share of state-owned enterprises in the
total industrial output had fallen sharply to 28.5% owing to the emergence of various
non-state enterprises such as foreign-invested ®rms and rural township and village
enterprises. Speci®cally, the share of industrial output among the non-state enter-
prises in 1996 was 39.4% for urban and rural collective enterprises, 15.5% for
individually owned enterprises, and 16.5% for other types of enterprises including
foreign-invested, privately owned and joint-stock enterprises.
One of the key factors responsible for the poor performance of the state-owned
enterprises has been their governance structure. This article addresses this problem
and considers the main reforms which have been introduced in recent years.
LEGAL FRAMEWORK FOR ENTERPRISES
China did not have any uni®ed legislation covering all types of enterprises with
dierent ownership until 1993. The Company Law was passed by the National
CCC 0271±2075/98/030273± 08$17.50
#1998 John Wiley & Sons, Ltd.
PUBLIC ADMINISTRATION AND DEVELOPMENT
Public Admin. Dev. 18, 273±280 (1998)
*Correspondence to: Geng Xiao, Department of Economics, University of Hong Kong, PokfulamRoad,
Hong Kong.
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