by Wendy Liu
For Those Whose Concept of China Has Frozen in the 1970s and for Anyone
Who Would Like to Know About Today's China.
7.
On the same occasion, Mr. Jiang also announced China's boldest-ever measures of reform, the reform of China's sclerotic state-owned enterprises (SOEs). Most of the SOEs were bloated, inefficient and struggling and half of which were not even profitable according to the World Bank.
The reason they were in such a sorry state was that they were miniatures of China's socialist economy that provided everything to their workers, from life-long employment to schools, daycares, hospitals, subsidized housing, dining halls, etc. while producing products no one wanted. The reform measures announced by Jiang were part of an ambitious three-year plan, to be spearheaded by Premier Zhu Rongji to revitalize China's economy. The main content of SOE reform was that the state would retain only 1,000 or so of China's largest and "backbone industrial enterprises" after re-organizing them into conglomerates, while letting go of the rest
often estimated 308,000 SOEs through restructuring, merger, leasing, contract operation, joint stock partnership and sell-off. The policy goal was dubbed "Hold the large and release the small."
How are China's surviving SOEs doing today at the beginning of the new century? According to the head of China's State Development Planning Commission, by the end of June 2000, 3,625 of China's 6,599 money-losing SOEs are no longer in the red, after more than two years of efforts since the government had pledged to reform the SOEs and help SOEs out of red within three years. Of the 2,473 SOEs selected to carry out reform of their operational mechanism, 2,016 had been transformed to corporations by 1999. Among the 94 major SOEs directly under the administration of China's central government, nearly three-fourths converted part of their business
to the shareholding system, while almost one-half of the 420 major SOEs under the local governments' administration issued shares.
Although more time may be needed to fully assess the three-year SOE reform program, the undeniable truth is that it has been a surgical operation on the heart of China's otherwise socialist economy. The program has shrunk forever the last stronghold of control of the means of
the production by the state, and also consolidated SOEs in a new manner. It is nothing short of a process of economic liberalization and privatization. In fact, it has been a historic undertaking of "de-reddening," de-socializing and de-communizing China.
The Communist Party of China might indeed have reached the drastic and unprecedented policy decision to reform and sell out the SOEs more out of pure economic and political necessities for its own monopoly of power. But the fact that the SOEs have been radically transformed also tells clearly of a collective change of heart, reluctantly maybe, on the part of the Communist Party and a 180 degree change of direction of the Chinese nation on its journey in history, from a slow and rocky hike on the trail of red socialism to a quick march onto the broad avenue opposite: the capitalism of blue?
(To be
continued...)
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