Changing incentives for chinese state-owned enterprises

Abstract

This study overviews the current state of the Chinese state enterprises and bank reforms.Transformation of command economy into market economy has until recently been relatively frictionless, at least in retrospective to other command economies. Recently economic growth has become sluggish which has been blamed on structural factors.Corporate governance reform is recognized as the next key issue of reforms.Despite the economic weight of state owned enterprises is diminishing, the financial sector is heavily linked to the SOE.The current economic woes result from the reckless lending practices, the money was given to those with political influence instead of those deserving.Now, the amount of bad debt is threatening the stability of the financial sector. Institutions required for effective corporate governance are emerging.However, the state wants to retain control over the former state owned enterprises, which hinders the proper functioning of the market.Piecemeal reforms do not appear to suffice and there are some serious doubts of the capacity to finance the reforms. Keywords: China, Economic Reforms, State Owned Enterprises, Corporate Control