The First Phase Of The Chinese Economic Reform Was Characterized

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The first phase of the Chinese economic reform was characterized by an emergence of rural initiatives and new modes of corporations such as TVEs. The central authority allowed vague ownership and, therefore, permitted the existence of transitional institutions that retained the pre-reform structures yet functioned to serve the contemporary users. In the industrial sector, however, at the beginning of the first phase, state-owned enterprises dominated the economic output when private foreign invested firms did not appear. Two decades after, SOEs only comprised of about one-third of the total output while collective enterprises and private firms occupied one-third each. This drastic drop of the power of SOEs was the result of both the…show more content…
However, the development of TVEs and the entries of private enterprises and foreign joint ventures became the chief driving force in the early reform period. These were the brand new institutions, unlike state-owned enterprises. The deteriorating performance and market share of SOEs attracted the attention of Qian and Lin. In the wave of growing business of various types of enterprises, the large-scaled SOEs could not sustain their profits and constantly need governmental subsidies, a phenomenon in opposition to the economic trend in the reform era. Many SOEs had to offer their employees insurances, training, education and health care, deepening the financial burden. Such an anti-development scene would make Lin and Qian oppose the ideas of Rawski and Jefferson. Qian observes that large-scaled state-owned enterprises, even though experienced managerial reforms and ownership reconfiguration, continued to suffer from declining performance, i.e. profitability. The new corporate organization consisting shareholders, board of directors and supervisory board clashed with the role of the party committees. In this case, Qian pointed out that the key reason for this failure was the party’s control over the appointment of senior executives of SOEs. The executives’ politicized standing overshadowed their role in enhancing the corporate performances. The secretive selection
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