Study On The Subsidies To Loss Making State-owned Enterprises In China

Since1979, china transformed its work center to the socialist modernization construction, and Opened a new era of the economic system reform. China’s economic system reform is the reform which take the market as guide, as the center of the economic system reformation, its state-owned enterprises (soes) reform’s main mission is move to a market economy, and transformed from the cells of planned economy to the mainstay of the market economy. Over the past30years, the reform of state-owned enterprises has experienced five stages of development and made great achievements, It has separated government functions from those of enterprises and investment, it has realized structural adjustment.The large state-owned enterprises has grown to the main part of the market and become the pillar of nation’s business. And this is our economic base to implement the strategy of science and technology innovation. The reform of state-owned enterprises has promoted the interaction of enterprise system changes and the economic system change. It has played a key role to the formation of the socialist market economic system with Chinese characteristics.Although the market-oriented reform had brought excellent performance to state-owned enterprises, lots of drawbacks also emerged, one of most serious problems is book losses. Market-directed economics system implies only the fittest survive, so some non-completely mercerized state-owned enterprises have to face and resolve the loss problem during transition period. The underlying causes of loss including four aspects: historical reasons, macroscopic causes, mechanism reasons and structural factors. Because of the vital role of state-owned enterprises in ensuring economic development, improve people’s living standard and promoted national competitive power, the government have to adopt a series of measures to guarantee the smooth operation of state-owned enterprises, and loss subsidy is one of them.The theoretic importance of this paper reflected as follows:firstly, it is a supplement of the theory of subsidies to state-owned enterprises. The theory of subsidies to state-owned enterprises is not only one important part of the fiscal subsidy but also one major part of the reform of state-owned enterprises. By combing the theory of fiscal subsidy, it make a summing up of the generality and particularity of the theory of state-owned enterprises, and it also provide certain theoretical basis for the smooth transition to a socialist market economy in China. Secondly, the reform of state-owned enterprises is the central part of the economic system reform, it can provide some micro foundation for the transition of economic system reform. The market played a fundamental role in the allocation of resources for more than30years, but a real socialist market economic system has not established, we should made the fundamental change of enterprise in the traditional planned economic system, and to build China’s enterprise system, especially the state-owned enterprise system. Finally, the improvement of the state-owned enterprise loss subsidy theory will lead to the perfection of theories about fiscal, tax, property right, etc. The more energetic of the state-owned enterprises, the more urgent for the country to improve macroeconomic control. In order to promote the overall economic system reform, the smart use of various economic levers is very necessary.The practical implications of this paper reflected as follows:first of all, in the course of the promotion of the national core competitiveness, it is important to deal with state-owned enterprises loss subsidies correctly. Some state-owned enterprises have been in a vicious cycle of loss-making and subsidies, it is not only unfavorable to the development of state-owned enterprises, but also it will waste the national fiscal revenue. The state-owned enterprise loss subsidies should be treated correctly, and it is also urgent to establish a fair market environment for all kinds of enterprises. In the short term, it can improve the competitiveness of state-owned enterprises, and make the country’s fiscal revenue from people and also serve people. In the long term, it can lay a solid market foundation for the long-term development of the national economy. Secondly, the financial reform and the reform of state-owned enterprises should be proceeding simultaneously. It is better to promote financial reform first, including financial system, system of national debts, fiscal polices, etc. In the meantime, the country should be committed to perfect the interior incentive mechanism, restraint mechanism and the supervision mechanism inside the state-owned enterprises.After30years of reform, China’s state-owned enterprise reform has accumulated rich experience, which point the correct way of state-owned enterprises reform in the future. China should adhere to the reform direction of socialist market economy, and devoted to make the state-owned enterprise become the main body which is adapted to market economy, to become a relatively independent producers and business operators. The reform of state-owned enterprises should be promoted step by step, from decentralization to establish modern enterprise system, from clarify property rights to ensure the investor is in place, and the purpose of these measures is definite, including the separation of enterprise from administration, to improve business management, pay more attention to the institutional improvement and innovation, and so on. In addition, the country should develop the state-owned economy on the whole, to make the state-owned economy play a leading role in the national economy. Meanwhile we follow the principle of "retain the large, release the small", and put more attention to the central enterprise which is related to people’s livelihood. Based on the study of state-owned enterprises’reform process and foreign advanced experience, this paper puts forward suggestions on the reform and loss subsidy of state-owned enterprises. The main contents are as follows.Chapter one is introductory theory. On the basis of the selected topic background introduction, we discussed the meaning of state-owned enterprises loss subsidies research. After elaborate literatures about state-owned-enterprises reform and subsidies to cover enterprise losses, the article point out that, due to the different economic system and operation mechanism, China’s state-owned enterprises in the loss of subsidies is particularly critical in the development of state-owned enterprises. Then the article lists the research framework and the contents, illustrates the research method of this article, as well as the innovation and deficiency.The second chapter is theoretical framework about State-owned enterprises loss subsidies. The state-owned enterprises loss subsidy is one of the types of subsidies, so this chapter lists the framework of fiscal subsidies. The first section lists the theoretical framework of subsidies to cover enterprise losses, and analyzes the relevant definition of fiscal subsidies; The second section is a general analysis of fiscal subsidies, and it is a framework foundation for the analysis of state-owned enterprises loss subsidies. The third section is the influence on production and consumption of fiscal subsidies, and it analyzes the mechanism of action of fiscal subsidies; the last section is the determination of state-owned enterprises loss subsidies, including the definition of state-owned enterprises loss subsidies and the comparison of the loss of subsidies and price subsidies. The third chapter analyzed the history and status quo of China’s state-owned enterprises subsidies. History is a mirror. The first section analyzed the background of the reformation of China state-owned enterprises. The second section analyses the history and current situation of the loss subsidies of state-owned enterprises, the third section points out the problems existing in the state-owned enterprises loss subsidies, from three aspects such as the scope, the amount and the efficiency. The fourth section lists the cause of the loss of state-owned enterprises, including policy reasons, lack of viability, mechanism design is not reasonable and the distortion of the industrial structure.The fourth chapter is about the International comparison and experience for reference. Before the analysis of China’s state-owned enterprises reform and the loss of subsidies, we should understand the world’s advanced economies in the reform of state-owned enterprises and the actual situation of the loss of subsidies, and draw lessons from the advanced experience, State-owned enterprises is a common economic phenomenon which exists in the world. But because of the difference of economic system, state-owned economy share vary from country to country. The position of State-owned enterprises in each country’s is also different, so each country’s government has different ways to cope with losses. Through analyses the situation of Japan, Germany and Britain, The article points out advertent questions in China’s reform.The fifth chapter is an empirical analysis of the state-owned enterprises loss subsidies, first lists the theoretical basis of our problem, then the article analyzes the relationship between the state-owned enterprises loss subsidies and the economic development by using the method of generalized moment analysis. On the one hand, the state-owned enterprises loss subsidies encouraged the development of state-owned enterprises; on the other hand, the state-owned enterprise loss subsidies caused the unfair competition environment, and it is conducive to the development of private enterprises. In order to meet the demands of achievements and regional competition, the development of state-owned enterprises are still supported by the local government in many areas. The root of this kind of question is national policies, the policies continue to maintain the traditional pattern of development strategy, and the reform measures is not match the country’s reality. The last part of this chapter is the structure and industry analysis of the state-owned enterprises loss subsidies. Chapter six is strategy optimization about the Chinese state-owned enterprises in the loss of fiscal subsidy. First of all, we should correctly handle the relationship between government and state-owned enterprises. When the government regulate the economic activity, it must respect market and reduce the intervention to the market, and make the market mechanism plays the basic role of the allocation of resources. On this basis, to conduct the market-oriented reform of state-owned enterprises, to improve the modern enterprise system, to transform economic development mode, and to strengthen the state-owned enterprise development momentum.In transition period, we should reshape the new pattern of state-owned enterprises in the loss of subsidies, including the applicable scope of the adjustment and relevant policies, etc.Loss subsidy won’t be a panacea. In modern society, enterprise and government are the two powerful forces that mastered the institutional changes. Market mechanism isn’t aim for government, but enterprise. It provides the platform for competition between companies. Therefore, loss subsidy of state-owned enterprises should be stick to the bark, and let market economic system play its function perfectly.