The impasse of China's state owned enterprise reform

The goal of China's SOE reform is to transform the SOEs from basic units of the centrally planned economic system into autonomous actors in the market. Why is it that after more than twenty years of reform practice, a non-market-oriented mode of behavior still dominates the SOEs?; Methodologically, the traditional paradigm of dichotomy, which divides a social formation into two mutually independent parts---economic system vs. political system, or civil society vs. the state, can not be simply adopted and directly applied to China's SOE reform analysis. The "organizational principle" (J. Habermas) which integrates the Communist Chinese social formation is an unified power structure which penetrates the traditional boundary between a political system and an economic system. In this power structure, the power relationship between the Party/state and the SOE managers has been based on hierarchical appointment/subordination, while that between the Party/state and the workers has been based on a "social contract". It is through this power system that the SOEs are operated.; The SOE reform marked an attempted transfer of managerial rights from state organs to the SOE managers. But it could not break the old hierarchical power relationship between the Party/state and SOEs. Instead it reproduced it, and meanwhile further separating SOE workers from economic decision-making power. As a result, three problems have occurred. First, the Party/state's non-market-oriented behavior has inevitably impacted on the SOEs' mode of behavior. Secondly, transferring economic rights/powers to SOE managers did not transform them into entrepreneurs, but instead give them more freedom to abuse their powers. Thirdly, separating workers from decision-making and depriving them of their economic rights has inevitably stimulated strong resistance, which has profoundly affected the reform process. The non-market-oriented behaviors of the three major actors in China's SOE reform---the Party/state, the SOE managers, and the workers---have thus contributed to the general non-market-oriented mode of behavior of SOEs in the reform.; In addition to the main body of discussion, an intensive case study has been provided to demonstrate the real world of reform process in an SOE.; Two basic lessons can be drawn: First, the reform relies on the existing power organization to change the relations of production, yet the existing power organization itself is the core of the very relations of production that need to be changed. Second, if working class resists the reform, the reform will not succeed. A successful SOE reform must change the existing power structure, and turn the workers from being an obstacle to becoming the dynamic force of reform, leading to a new enterprise model based on self-organization and self-management.