China's state‐owned enterprises: economic reform and organizational restructuring

Abstract

Purpose The purpose of this paper is to examine how the Chinese economic reform process has engendered significant changes in the structure and management of work organizations. Central to this process has been the “marketization” of state‐owned enterprises (SOEs). The paper reviews the attempts to reform SOEs as conducted, primarily, under the modern enterprise system (MES) and group company system (GCS) programmes. Design/methodology/approach The paper analyses institutional issues relating to organizational restructuring, describes the evolution of the SOE “problem” in China, and discusses case evidence of enterprise reform in one of the largest SOE‐dominated industries, iron and steel. Qualitative field data, collected regularly (mostly yearly) since 1995, were derived from in‐depth interviews with executives of ten large SOEs that have restructured as part of MES and GCS programmes. Findings It is suggested that the historic reluctance of SOEs to embrace reform stems from three main factors – the opaque nature of property rights, the failure of ministries to produce a firm strategy for channelling surplus labour and the inability of government agencies to offer a sense of managerial autonomy to SOE executives. Recent policies designed to overcome these problems together with kindred ones for separating government functions from business operations in the drive to prepare SOEs for global markets are described. It can be argued that China's preference for gradual reform reflects the wider reform context where economic restructuring has not been accompanied by a greater expression of political democracy. Originality/value The paper's findings offer insights from a major longitudinal field study of two of the main programmes of China's reform period.

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