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SOE Restructuring in China

Jan 2004
Stanford King Center on Global Development Working Paper
204
By  Ross Garnaut, Ligang Song, Yang Yao

Based on a recent 683-enterprise survey done in 11 cities, this paper reviews the recent history of state-owned enterprise (SOE) reform, the forms of restructuring, the handling of state assets, reemployment of workers, and firm performance after restructuring in China. Restructuring in many cases involves privatization. The process has been a result and part of the market liberalization process dating back to the mid-1980s. The most popular way to privatize has been employee shareholding, but open sales and leases have become more frequent in recent years. Considerable discounts on privatization prices are often given to buyers in exchange for fewer layoffs of workers. The outcome of restructuring is encouraging. Restructured firms have been found to have higher productivity and profitability than the SOEs.