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State-owned industrial enterprises in China underwent far-reaching changes during the 1980s. Reforms altered the operating environment, financial arrangements, business and administrative relationships, and internal structure and motivation of firms. This book, a compilation of detailed case studies...
State-owned industrial enterprises in China underwent far-reaching changes during the 1980s. Reforms altered the operating environment, financial arrangements, business and administrative relationships, and internal structure and motivation of firms. This book, a compilation of detailed case studies, analyzes how reforms and other changes in the economic system affected the behavior and performance of enterprises. The authors develop the following themes that emerge from the case studies: (a) how changing market conditions influence the actions of enterprises; (b) how directive planning by government agencies hinders the reform process; (c) how enterprise objectives are molded by the strong emphasis on worker ' s interests in the urban state-owned economy; (d) how reforms affect the constraints faced by firms in pursuing their objectives, often leading to unanticipated consequences; (e) how lack of financial discipline weakens incentives and undermines reforms; and (f) how the fragmented, overlapping, and confusing system of bureaucratic supervision inhibits business decision-making. The case studies illustrate that continuing government administrative control over enterprises brings with it fundamental problems and that partial reform can induce distortions.
