For the past few years, China has been pursuing a new and ambitious state-owned enterprise (SOE) reform program. SEOs are huge in terms of size, yet they only provide 16% of jobs, less than a third of national economic output, and a return on assets of only 2.9%. Hugely inefficient, debt-ridden and responsible for most of China’s ballooning corporate debt, SOEs are a drag on an economy that Beijing wants to transition—unlike past efforts which is about privatization, but just the opposite—from investment and export-driven to services and consumption-driven.
China’s longstanding reform program has failed to keep up with the pace of change in this vast nation. The enormous impact on growth of joining the World Trade Organization has now largely played out, and the path towards developed economy status—while avoiding the so-called middle income trap—depends upon careful management of an extensive program of economic reform. In November 2013 at the Third Plenum of the 18th Central Committee, a grand total of 60 reform proposals were outlined, affecting almost every aspect of the economy. Over two years have passed since. We take stock of just how much progress been made.
China’s economic growth has dropped to a 24-year low. There’s not much room for further decline as Beijing has reaffirmed its goal of doubling the GDP between 2010 and 2020. This means growth of 6.5% a year. The conventional methods of boosting growth are no longer deemed dependable. Beijing is now pinning its hopes on unlocking another round of “economic dividends” by carrying out reforms to make the entire system more market-driven. But can China carry out economic transformation without hurting growth? We ask Anthony Saich, Director of the Ash Center for Democratic Governance and Innovation at Harvard Kennedy School.
It is a truth universally acknowledged that a Chinese state-owned enterprise (SOE) in possession of industrial assets must be in want of reform. China’s reforms have released many assets into private ownership, but large blocks remain in corporations linked either to the central government or to a local government via chains of corporate ownership. The State Council’s latest guidelines on the reform of state-linked enterprises envisage more private ownership, some mergers, and a greater role for state asset management companies. But would that ensure better corporate governance?
Does China’s debt, which refuses to stop growing, threaten to take the show off the road?
A quick guide to some of the hottest topics that came up during the 2015 Lianghui, the two annual meetings that set the agenda for the Chinese economy.
Western consultancies are facing questions in China. Can Chinese companies capitalize on the moment?
Carnegie Endowment’s Yukon Huang offers a new perspective and demystifies some popular notions about China, such as fears about the real estate bubble.
Allen Wu, chip designer ARMʼs Greater China President, on how the company is navigating Chinaʼs increasingly treacherous environment for foreign companies.
The popular notion is that state-owned enterprises are very powerful in China. To what extent is that true? Are fears of China’s state capitalism overblown?