ABSTRACT
This chapter shows, first, that dealing with the triangle of woes is complicated, and therefore requires cooperation between the central, provincial and local governments and state-owned enterprises. Second, China has been dealing with this bundle of problems by tackling the easiest part first — for example, instead of laying off workers at key large state enterprises, it has tried to expand opportunities in other sectors, retraining, down-loading pressures, etc. Third, in this dealing, institutions rather than individuals are the primary players — while the existing institutions are in charge of making arrangements for redundant employees, new institutional arrangements are made governing unemployment and financial disciplines of enterprises. Since the power industry in China remains vertically integrated, distribution is done by the same power companies which produce, transport, dispatch and transform electricity. Reform of the power industry through corporatization and unbundling vertical integration cannot materialize until the soft budget problems are resolved.
