The Elusive Market: Privatization, Politics and State–Enterprise Reform in China
| Author | J. Sheehan,J. Morris,J. Hassard |
| Published date | 01 December 2002 |
| Date | 01 December 2002 |
| DOI | http://doi.org/10.1111/1467-8551.00239 |
Privatization and state-owned enterprise
China has won praise for its gradualist, pragmatic
reform path since 1978, particularly in compari-
son with the countries of Eastern Europe and the
former Soviet Union (EEFSU) (Buck et al., 2000;
Child, 1994; Nolan, 1995). But successful though
it has been to date, the reform programme has
now come to the point where all the relatively
easy and less controversial steps have already
been taken, and what remains to be tackled are
much more difficult and politically sensitive issues
such as employment restructuring, ownership
and property rights issues, and the relationships
between state-owned enterprises (SOEs) and cen-
tral and local government (Gu, 1999; Putterman
and Dong, 2000; Zweig, 2001). The very nature of
the SOE in pre-1978 China means that this stage
of reform is inextricably bound up with other
wide-ranging reforms such as the abolition of
subsidized housing and the effort to set up an
urban welfare state in China under local-govern-
ment auspices (Guan, 2000; Weller andLi, 2000).
It is also occurring at a time of great economic
difficulty throughout the region. Some of the steel
corporations in our study are finding themselves
having to compete for domestic business with
Japanese and Russian firms, as these seek new
markets to replace those lost in Southeast Asia
because of the financial crisis and economic
downturn there. At the same time, Chinese steel
corporations are having to look for new export
markets for the same reason. The resulting price
competition has reduced profit margins which
were often not generous to begin with (Interview
2, 1998).1
Aside from these unexpected external factors,
problems of ideology and politics are still
hindering further progress in state-enterprise
reform. Change has generally gone furthest in
those areas which are purely internal to the
corporation, although even here the influence of
existing power structures remains strong in many
respects. Externally, despite twenty years of
British Journal of Management, Vol. 13, 221–231 (2002)
© 2002 British Academy of Management
The Elusive Market: Privatization, Politics
and State-Enterprise Reform in China
J. Hassard, J. Morris* and J. Sheehan†
Manchester School of Management, UMIST, PO Box 88, Manchester M60 1QD, *Cardiff Business School,
University of Wales – Cardiff, Aberconway Building, Colum Drive, Cardiff CF10 3EU and
†Department of History, Nottingham NG7 2RD, UK
Email: John.Hassard@umist.ac.uk [Hassard]; MorrisJL@cardiff.ac.uk [Morris] and
jackie.sheehan@nottingham.ac.uk [Sheehan]
Although China’s largest state-owned enterprises (SOEs) are destined to remain state-
owned for the immediate future, recent reforms have affected these SOEs’ property
rights and ownership structures. Moreover, the government’s insistence that privatiza-
tion is not implied by present reform programmes is increasingly contradicted by actual
developments and managers’ attitudes at the enterprise level. This article explores
some of the political and organizational tensions created by this present phase of
SOE reform.
1The research for this article was funded by a grant
from the Economic and Social Research Council
(R000222515). The authors thank Professor Chen
Zhicheng of the Institute of Management Science,
University of Science and Technology, Beijing, for his
invaluable assistance in arranging the Chinese field
visits for this project.
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