Reforms of State-Owned Enterprises in China

During the central planning economic era of China, the Chinese industrial sector was dominated by state-owned enterprises whose priority is not the profit but to fulfill the production command under the central plan and provide people a stabe job. In that situation, employees do not have many choices of what they do, since it is not the question of what you want to do, but whether you have a job or not. So it is clear that human resources were sufficiently but not efficiently used.

The reform of this state-owned enterprises system introduced a "contract system" in the 1980s, and in the 1990s, the separation of business management from state ownership. This idea of decentralization is to motivate the production and encourage business in a competitive market. The goal is to transform the state-owned enterprise from a cost center to an economic unit which makes profits.

Since the 1990s, the Chinese government keep enlarging the scale and depth of the reform by restructing the state-owned enterprises into limited liability companies or joint stock companies and converting debts to stocks. Those debts used to became government deficit, in order to support the enterprises.

However, since more than half of the stocks controlled by government bureaucrats who have only an inderict interest in profit, there are still many situations with inefficient decisions.

In 2002, the Chinese government made the decision to sell state-owned shares in some big companies in order to maximize the profits.

As reforms keep on, many had argued about the welfare of employees, and stabilities of employment. The government still try to find the balance which benefits most.