December 2012
State Enterprises: Reform Or Die?
One of the most persistent claims made about China’s economy is that an embattled private sector is getting squeezed out by increasingly powerful state-owned enterprises. This claim does not stand up to the evidence: private companies have increased their share of virtually every economic indicator, from exports to employment to bank credit. But that does not mean all is well in corporate China. Though large in aggregate, private firms remain individually small, and few are able to operate nationally or at full economies of scale. State companies, by contrast, have become much larger on average, and in a number of key sectors pose significant obstacles to market reforms that would increase competition and enhance productivity. A renewed shake-up of SOEs is needed both to give the more dynamic private sector room to operate and to ensure that China’s economy can achieve its potential growth rate of 7% or so over the next decade. CEQ explains the role of state enterprises in China’s economy and suggests how they should be reformed.
Also in this issue:
- Michael Komesaroff shows how China’s state-backed resource companies are reshaping global mining
- Paul French explains why listed retailers are struggling
- Thomas Gatley and Rosealea Yao predict that housing supply will peak in 2013
- Chao Gupiao worries that the stock market regulator has lost its nerve
- Tom Miller argues that household consumption will not reach its potential without political reform
- Denis F. Simon analyzes the government’s latest plan to turn China into a powerhouse of innovation
- Matthew Forney and Laila F. Khawaja report on the progress of carmaker Geely
- Simon Cartledge reviews new books by political scientist Peter Nolan and veteran journalist James Fallows