Did the restructuring program save China’s state-owned enterprises?

LI Nan1 and QIAO Zhen2

1Division of Social Science, Hong Kong University of Science & Technology
2School of Economics and Business Administration, Heilongjiang University
Abstract:

This paper presents an evaluation of the performance of the third phase of the SOE restructuring program initiated in the late 1990s using the difference-in-differences model based on industry and sector data (1999-2006). This study reveals that the difference between the performance of the state-owned sector of the economy (SOSE) and the performance of the foreign-owned sector of the economy (FOSE), a best-performing sector in China’s non-state-owned economy, has been decreasing since 2003 in spite of an existence of some discrepancies. After launching a series of reform measures aimed at “grasping the large and letting the small go” and encouraging mergers and acquisitions of state-owned enterprises in 1999, the Chinese government has improved the financial position and economic performance of the SOSE. Meanwhile, this paper also provides indirect evidence to reveal that firm size, industrial monopoly status of state-owned enterprises and the curtailed battlefront of the SOSE play an important role in the process of the continuous improvement in the performance of the SOSE.

Key words:

SOE restructuring, policy effects evaluation, difference-in-differences

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