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The Current Wave of State Enterprise Reform in China: A Preliminary Appraisal
Author(s) -
Naughton Barry
Publication year - 2017
Publication title -
asian economic policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.58
H-Index - 20
eISSN - 1748-3131
pISSN - 1832-8105
DOI - 10.1111/aepr.12185
Subject(s) - china , corporate governance , autonomy , state (computer science) , function (biology) , economic system , investment (military) , business , economics , market economy , state ownership , industrial organization , finance , emerging markets , politics , political science , evolutionary biology , computer science , law , biology , algorithm
State enterprise reforms are underway in China, and include some positive and overdue corporate governance reform. However, the potential effectiveness of the reforms is compromised by the attempt of policy‐makers to achieve three goals which form an “impossible trinity”: increase firm autonomy; improve oversight; and assign new developmental missions to state firms. The goal of assigning new developmental missions to state firms is reflected in the design of new state investment companies which are intended to gradually take over ownership functions from existing agencies. The structure and function of the new ownership agencies undermines the potential of the corporate governance reforms at the enterprise level. These contradictions will be costly because state firms will likely be ineffective in carrying out developmental missions—particularly technology innovation—while also failing in the enterprise reform goal of becoming more efficient and profitable.