ABSTRACT
Most literature on the reforms of Chinese SOEs reported specific SOE efficiency problems – declining profitability and increasing loss making (McKinnon, 1994; Nolan, 1995; Sachs and Woo, 1997; Jefferson and Singh, 1999; Cook et al., 2000; Lin and Zhu, 2001). Faced with mounting losses in the state sector, in the mid1990s, the Chinese government began to shift the focus of SOEs reform from piecemeal measures to privatisation of small SOEs and corporatisation of larger ones. Research has shown that it is not realistic to entirely privatise all SOEs considering the important roles they have played in the national economy and the social responsibilities they have undertaken (Jefferson and Singh, 1999; Cook et al., 2000; Liu, 2000; Chen and Wills, 2002). The government hoped that corporatisation could be an achievable and effective way to improve the performance of large SOEs. The aim is to turn SOEs from entirely publicly owned companies to shareholding companies, which previously controlled by industry-specific government agencies at various administrative levels, could now be transformed into companies that are, at least in theory, independent of the state in decision-making and, through the issue of shares, diverse in ownership.
