From Federalism, Chinese Style, to Privatization, Chinese Style

Yuanzheng Cao, Yingyi Qian and Barry R. Weingast

Working Papers from Stanford University, Department of Economics

Abstract: December 1997

In 1994 China began a profound reform of its state-owned enterprises. We first describe and characterize this progress in two areas: privatization of small state-owned enterprises at the county level and mass layoffs of excess state workers at the city level. Local governments have initiated these reforms, which are proceeding in economically and politically sensible ways. We then argue that privatization, Chinese style, rests on an adequate economic and political foundation -- federalism, Chinese style. We suggest a range of incentives that propel local governments toward SOE reform, including their harder budget constraints and increased competition from the non-state sector. In this sense, federalism, Chinese style, has induced privatization, Chinese style.

Key Words: Privatization, Restructuring, Federalism, Local Governments, China

Keywords: Privatization; Restructuring; Federalism; Local Governments; China (search for similar items in EconPapers)
Date: Written 1997-12
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