ABSTRACT
This chapter analyses the reform of the enterprise management system in China during the initial period 1979 to the early 1980s. In the traditional system, before the economic reforms in the late 1970s, Chinese state enterprises submitted all of their realized profits to their owner, the state. Though the tax-for-profits system was to be adopted in all large- to medium-sized state industrial enterprises, replacing all the former forms of the profit retention systems, Chinese authorities allowed some exceptions for several sectors including the steel industry to keep the profit contract system. The chapter provides institutional elaboration of the reform in such aspects as state-enterprise distributional relations, enterprise leadership systems, and labor systems. In the initial reform effort, the central leadership wished to free the enterprise from the former overly tight grip of local state organs, and thus wanted to narrowly define the rights of local state organs over the enterprise.
