ABSTRACT
State-owned enterprises in China, like their counterparts in formerly centrally-planned economies, play a major role in providing social services to their employees. While SOEs are obliged to provide such services, which will certainly increase their costs of production, most non-state enterprises do not have such obligations. It is therefore important to know if the financial conditions of SOEs would have been different had they not been providing social services. Will those loss-making SOEs still be insolvent, or will they be able to break-even or even be profitable? The answer to this question has important policy implications.
