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Over the past 40 years, China’s private sector has emerged and become the leader of the world factory of manufacturing exports. Actually, the Third Plenum of the 18th Party Congress in 2013 already declared the PRC’s market a decisive player which has reasserted the dominant position of public ownership.

The most visible manifestation of China’s public ownership is its state-owned enterprises (“SOEs”), which internally rule sectors such as energy and telecommunications, and externally are the vanguard of the Chinese direct investments. Some of these SOEs are under the administration of the State Council’s State Asset Supervision and Administration Commission (“SASAC”), some report to the Ministry of Finance and some depend from provincial and county-level governments.

This fragmented model implies a flexible notion of ownership together with the omnipresent desire to consolidate employment/investment rights into an accountable single decision maker. As a consequence, both in private and public companies party cadres muddy any clear distinction between politics and business; companies have close relationships with government but if non-state companies lack formal ownership links to the state, the private ones need to keep the state/party on side.

It is generally known that representative state-owned enterprises cannot cure Chinese economic maladies. While state ownership creates a conflict of interest between the state as owner and as regulator, turning state monopolies into private ones produces a force for political opposition outside the current political structure and leads to crony capitalism; privatization is not enough since the necessary condition for prosperity is not ownership but that Chinese state intervention proceeds according to a transparent rule of law. 


The gLAWcal Team

LIBEAC project

Monday, 23 January 2017

(source: EastAsiaForum)