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An assessment of the state sector reform in China: Viability of ‘legal person socialism’

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  • Keun Lee

Abstract

The transformation of the old state enterprises into shareholding corporations is now being attempted as one form of corporatization in China. The Chinese authorities intend to encourage public‐oriented legal persons as shareholders for these shareholding corporations. This strategy, which can be termed ‘legal person socialism’, may be successful to the extent that corporatization brings in more funds and autonomy to the enterprises, but eventually more and more individual shareholders will have to be invited. Only currently ‘profitable’ state enterprises will be transformed into shareholding corporations and be able to sell stocks successfully. For loss‐making enterprises, transformation into shareholding corporations is now rarely permitted by the authorities and will not be a solution even if attempted. Thus, it can be said that the idea of legal person socialism is viable only for currently profitable enterprises if the state concentrates its financial and administrative resources on them, and that loss‐making enterprises are likely to be sold to or merged with domestic and foreign private investors. Thus, an emerging picture of the Chinese economy is that of a dual economic structure consisting of a majority of privately owned and a minority of state owned or controlled enterprises.

Suggested Citation

  • Keun Lee, 1996. "An assessment of the state sector reform in China: Viability of ‘legal person socialism’," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 1(1), pages 105-121.
    • Handle: RePEc:taf:rjapxx:v:1:y:1996:i:1:p:105-121
    DOI: 10.1080/13547869608724578
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    Cited by:

    1. Manuel F. Montes, 1997. "Viet Nam: Transition as a Socialist Project in East Asia," WIDER Working Paper Series wp-1997-136, World Institute for Development Economic Research (UNU-WIDER).

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