Abstract
Over the past decade, the People’s Republic of China (“China”) has undertaken economic and legal reforms that have been quite impressive. To carry out these reforms, the government has implemented many measures designed to boost the productivity of the public and private sectors. In particular, state enterprises have received special attention, due to both their importance in the economy and the kinds of problems which confront them. Of all the reform measures concerning the state enterprises, attempts to promote greater autonomy in their management have been among the most difficult to implement effectively.
In many socialist countries, reforming state enterprises has been one of the most intractable economic problems. Reform has been difficult because it calls for more than the government’s good faith, policy pronouncements and even administrative fiat. It requires fundamental legal and institutional changes that are of the most significant ideological, political10 and economic consequence. For instance, Chinese state enterprises are, in a sense, “vast kingdoms of welfare management” serving their beneficiaries – workers and their families. One major consequence of pushing enterprises to the market would be to break the “iron rice bowl,” a concept whereby workers are guaranteed a job with benefits, housing and free medical care for life. Since this kind of reform goes directly to the heart of entitlements enjoyed by enterprise workers, it is likely to be met with resistance. Furthermore, reform has been difficult to implement because it involves so many interrelated issues (e.g., property rights, organizational change, administrative supervision, welfare entitlements and market mechanisms). As a result, it is at times difficult to sort out all the relevant issues and to establish a proper order for reform. Because of the intractable and complicated nature of the reform process, governments have occasionally taken reform measures that merely graze the surface of the problem. This is particularly the case with respect to the laws and policies governing Chinese enterprise property rights.