The Evolution Of The Reform Thought Of State - Owned Enterprises In New China

Ever since the Year of 1949 has SOE Reform been a major problem for Chinese Socialist authority, which also draws a great amount of attention from Circles of Academia, Politics and Industry. However, though multiple research results have been concluded so far with a diversity of analysis methods, yet little is achieved in terms of Policy-Making due to a lack of understanding to the whole picture. Under this circumstance, the paper below covers the development of China’s economic thought on SOE Reform within the time range from 1949 to present day, while using the Theory of Principal-Agent to resolve conflicts of opinion in different phases. All this is meant to inspire innovations in future policy design and implementation.Required by “New Reference”, “New Method” and “New View” of scientific studies, our essay firstly draws cross-national comparisons of SOE experiences from Russia, Yugoslavia, Hungary, France, Germany, Britain and America, especially during modern time, in search of the hidden evolutionary rules behind the scene; and then goes through thousands years’ history of SOE debate since ancient China, such as the nationalization of natural resources, the monopoly of salt & iron, price regulation and product allocation plus chartered business, etc; lastly applies economic terminologies such as “Information Asymmetry”, “Moral Hazard”, “Soft Budget Constraint”, “Monopolistic Segmentation” and “Insider Control” to depict problems and resolutions constantly coming up with the SOE practices, among which “Seeking External Supervision”, “Fine-tuning Stimulus” and “Information Transparency” prove to be the trend of economic thoughts while from a Principal-agent perspective.Considering the particulars from time to time, this article hereafter summarizes the whole story into the following stages — Planned Economy of 1949-1977, when China’s innovation in SOE reform were heavily suppressed by doctrines such as “Large in Size and Collective in Nature” and “Egalitarianism and Indiscriminate Transfer of Resources”, resulted logically in “Administrative Decentralization” or “Spiritual Stimulus” and caused drastic chaos and moral disaster in return; Transitional Economy of 1978-1992, when the new administration unleashed a tide of ideological emancipation in terms of how to define Socialist Economy, pioneered in “Economic Decentralization” and “Materialistic Stimulus” but retarded by “Too Much Government Intervention” and “Soft Budget Constraint”, thus inducing huge losses; Market Economy of 1993-2012, when schools of Mainstream Economics especially from the Western World are gaining an upper hand, witnessed a package of overall reform featured by the policy of “Grasping the Large and Letting the Small Go”, namely, “Corporate Governance”, “Shareholder Dispersion” and “Public Listing” etc — All the above has opened a new vista for Chinese authorities since 18 th Party Congress with unprecedented Challenges and Opportunities.The Study shows that China’s SOE reform in recent decades, under either Planned or Market Economy, reflects a coherent process instead of an inconsistent one. That is to say, logical continuity, especially Problem-oriented and Path-dependent, does exist along with the entire institutional evolution from late 1950 s till now, whether it be “Government Decentralization”, or “Enterprise Autonomy”, or “Corporate Governance”, or anything else. From actual progress, it can also be aware that(a) China’s SOEs are turning further to external supervision, i.e. from central government through local government, corporate managers to shareholders;(b) Stimulus packages are made more and more effective by being selective and targeting mainly on the management team instead of all employees or social members;(c) Information asymmetry is greatly balanced to reduce the flexibility of agents, with “Gross Value Added” replacing “Gross Output” as the major statistical indicator while building the markets of products, managers and stocks in the meantime.The dissertation is arranged as following:Chapter 1 starts with a brief introduction of the overall research, including Background Study, Scientific Significance, Methodology, Procedure, Innovation and Structure. Besides, it also describes the birth, development and problems of SOE, while bringing up steps to the resolution which is the reform meant to be.Chapter 2 exemplifies from an economic history perspective the modern-time SOEs in both socialist and capitalist countries, such as Russia, Yugoslavia, Hungary, Germany, France, Britain and America, which are then compared to that of China since ancient time for the purpose of brain storm and inspiration.Chapter 3 depicts the story of China’s Planned Economy during 1949-1977 – firstly, it presents realities of the “Great Leap Forward” and the “Cultural Revolution”; and then, summarizes hot topics from discussion and debate at that time, such as “Commodity Production”, “Law of Value” and “Plan or Market”; lastly, uses the theory of Principal-Agent to interpret goals and consequences of key policies – which consists of the History of Economic Thought, Part I, of this paper.Chapter 4 expounds on the experience of China’s Transitional Economy during 1978- 1992 – firstly, it focuses on the practice of “Autonomy Expansion” in SOEs since Post-Mao Era; and then, extracts main ideas from the three significant conferences hosted at that time; lastly, uses the theory of Principal-Agent to portray the connections between institutional arrangements and its social impacts — which consists of the History of Economic Thought, Part II, of this paper.Chapter 5 draws the picture of China’s Market Economy during 1993-2012 – firstly, it lays out new measures like “Management Buyout” and “Stock Incentive Plan”; and then, arrive at the concepts of “Property Rights”, “Shareholding” and “Corporate Governance” etc; lastly, examine theoretically the actual requests for reducing “Government Intervention”, increasing “Competition for Corporate Control” and allowing more “Social Surveillance” – which consists of the History of Economic Thought, Part III, of this paper.Chapter 6 concludes the whole article by bring up the development of Principal-agent Theory, and elaborating its China expansion in the field of SOE reform with clear roadmaps mentioned above. After that, new policies since 18 th CPC National Congress have also been related to with further predictions.