Expansion of the Enterprise's Decision-Making Power and Change in the Ownership Relation

He Jianzhang

Chinese Economy, 1985, vol. 19, issue 1, 10-16

Abstract: For a long period of time a highly centralized administration, a system of direct state management, was exercised over industrial enterprises of public ownership by the whole people in China. This means a centralized arrangement for production, monopolized purchase and supply by the state, and unified collection of the revenue and disbursement of expenditure. In a word, the powers to manage personnel, financial, and material resources as well as supply, production, and sale were all concentrated in the hands of administrative agencies of the state at all levels; the enterprises did not have the decision-making power in regard to their operation and management. As all activities had to be conducted according to instructions from higher government agencies, the enterprises could hardly assume responsibility for the results of their operation. Consequently, it was the state that was held responsible for the losses or gains of the enterprises, which all ate "from the same big pot," namely, the state. An enterprise had no power to make adjustments for the wage earnings and fringe benefits of its employees. As the employees' personal interests were not tied to the results of the enterprise's operation, they, too, could only eat from the "big pot" of the enterprise. As a matter of fact, it is impossible for the state to handle properly all the supply, purchase, and sale relations of the enterprises, impossible to solve in time all the problems involving their manpower, material, and financial resources, and impossible to get rid of bureaucracy completely. Low efficiency and poor returns are the common failings of a highly concentrated management system.

Date: 1985
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