INTRODUCING MARKET FORCES INTO MANAGERIAL DECISION‐MAKING IN CHINESE INDUSTRIAL ENTERPRISES

John S. Henley and Mee Kau Nyaw

Journal of Management Studies, 1986, vol. 23, issue 6, 635-656

Abstract: This paper focuses on the fundamental changes in the management of state enterprises that are taking place in China. Specifically, we discuss the expansion of enterprise autonomy and changes in the managerial decision‐making structure. The genesis of the reform programme is traced back to inefficiencies caused by the over‐centralized state planning system which reduced enterprise management to little more than an administrative function dominated by the Party secretary. As a consequence, managerial and technical cadres became demoralized and the growth of staff functions such as accounting, marketing and personnel management was stunted. From a series of experiments launched in 1978 has grown the realization that tinkering around with the state planning apparatus is insufficient to stimulate entrepreneurship and vigorous industrial expansion. Accordingly, reform has been launched on a broad front both within the state apparatus, in an endeavour to roll back external constraints on enterprise, and within the enterprise itself, by seeking to provide powerful incentives both to managerial cadres and workers through a system stressing individual responsibility and rewards commensurate with results. A number of severe constraints on the reform programme are analysed, in particular, the changing balance of power within the enterprise between the factory director, the Party secretary, the workers’congress and the trade union. Contradictions exist within the new structure of decision‐making but, given a period of political stability and sustained economic growth, there should be sufficient surplus to mollify discontent and stifle those who refuse to give up their belief in the virtues of having‘politics in command’of the industrial enterprise.

Date: 1986
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