ABSTRACT
The state-owned enterprises (SOEs) in China have always been criticized for inefficiency, corruption and threatened to be a serious halt on economic reform. This chapter estimates the stochastic frontier production functions of thirty-seven industry groups and the technical inefficiency of each industry group from 1994 to 2000. It provides literature review of the production efficiency of SOEs in China. The chapter shows the empirical model and variable description, and presents the empirical results. The efficiency of the productivity of state-owned enterprise in China since its economic reform from 1978 is under debate. The state shareholding dummy variable (SH) tries to capture the change of production efficiency of a SOE before and after the state stock conversion change. However, the interpretation of the above should be cautious since the state-shareholding dummy could capture all the other influences not included in the estimated variables and how well the financial market discipline will perform in China.
