ABSTRACT
The progress the Chinese leadership makes in reforming the nation’s state-owned enterprises is a prism through which to view China’s readiness to assume the obligations of membership in the World Trade Organization. Most other countries in transition from socialism to a market system have turned to systemic, widespread privatization of large SOEs. In China, the state maintains ownership of key businesses, and government agencies carry out shareholder functions typically performed by private owners in market economies. Indeed a new “state asset management” regime, rather than ownership change, is the core feature of China’s “socialist market economy.” While market-oriented SOE incentives have been implemented since China began economic reform in 1978, today, Chinese SOEs still account for almost one-third of national production, over one-half of total assets, two-thirds of urban employment and almost three-quarters of investment. Preparing the way for subjecting China’s generally inefficient SOEs to WTO’s rule-based trade system poses a major challenge to the Chinese authorities.
