ABSTRACT
Corporate governance did not exist in China before economic reforms because urban
enterprises were not owned by shareholders, but by the state. The reform of state-
owned enterprises (SOEs) through corporatization and ownership diversification
has made nearly all of them share system enterprises. Some large and medium
enterprises have been listed on the Shanghai or Shenzhen Stock Exchange, and small
and medium enterprises have been transformed to be share corporations, or limited
liability companies. These changes in the structures of ownership and control gave
rise to the issue of corporate governance of Chinese firms. At its Fifteenth National
Congress of the Communist Party in 1997, the Chinese government concluded China
would reform its SOEs by building a modern enterprise system, or corporatization. In
the most recent Premier’s Work Report at the Second Session of the Tenth National
People’s Congress (March 5-14, 2004), the government reiterated its determination
to revive China’s state capital by strengthening corporate governance and turning
state enterprises into share-holding companies. This was to be done through mergers
between state and domestic private capital and between state and foreign capital.
