ABSTRACT
It was during the First Five Year Plan (1953-7) that the operation of the typical Chinese state industrial enterprise came nearest to its Soviet counterpart (including soft budget constraints). But even then the Chinese enterprise differed from the latter in significant ways. Thus manpower was allocated to the Chinese enterprise, virtually all profits were transferred to the state budget and management bonuses were much less important. The danwei (workplace) provided housing, health and social welfare services and the party took an increasingly important role in running the enterprise. Chaotic conditions prevailed during the Cultural Revolution. Experimental reforms began in 1978 but general reforms in the industrial sector did not begin to be implemented until October 1984. (See Jeffries 2006a: 441-3.)
The discarding of social functions In the original system the enterprise was not just a production unit. It was also, as we have already seen, a social unit. The shift to a more Western-type system of social welfare (unemployment compensation and pensions), health and housing is a difficult, costly and painful one. Such reforms are needed for state enterprises to compete more effectively with private enterprises in a market economy. (For experiments to provide unemployment compensation, see Jeffries 2006a: 443-4.) (For experiments to shift the pensions, housing and health burdens away from enterprises and towards various levels of government and/or individuals, see Jeffries 2006a: 444-50.)
Since the nationwide reform of 1997 the public pension system, which covers only 14 per cent of the active population, has been a two-part system. The first part provides a basic flat rate pension, while the second part provides a pension proportional to contributions.
