State Owned Enterprises in China

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State Owned Enterprises in china
The problem of the state-owned enterprises is like a big, broken-down truck that is blocking the road to development in China. Some traffic can find its way around the wreck but the difficulty that it creates grows with time. People are reluctant to destroy the truck because of the thought of how useful it would be if only it worked. There are about 300,000 state-owned enterprises (SOEs) in China but the real problem lies with the very large enterprises that need ongoing subsidies to survive. These large SOEs employ over 75 million people and provide essential goods and services in the economy so it is not economically or politically feasible to simply shut them down. For example, Sinopec (China Petrochemical Corporation) has a workforce estimated by Fortune magazine to be over one million. Another Chinese petroleum-based SOE, China National Petroleum Corporation, has a workforce estimated by Gordon Chang to be about one and a half million. There is already a serious unemployment problem particularly in rural areas. The dilemma is that the Party cannot stop propping up the SOE's because of the role of the SOE's as employers and providers of essential goods and services but as long as the Party keeps propping them up the SOE's have little incentive to change. Even when an SOE is nominally privatized the subsequent treatment of that enterprise by the Party indicates that it is still an SOE. Example :Gordon Chang cites the case of a cement manufacturer in Sichuan province. The SOE was corporatized in 1988 and given the name Golden Summit. Shares of Golden Summit were listed on the Shanghai Stock Exchange in 1993 and private investors own about four percent of the stock. The board of directors of Golden Summit consists entirely of government/party officials. When another SOE, Dadu River Steel, could not pay its workers the local government/party forced Golden Summit to takeover Dadu River Steel and its obligations. When other...
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