SOE reforms create new opportunities in China

Subject

Reforms of China's state-owned enterprises.

Significance

China’s government rejects the wholesale privatisation of its state-owned enterprises (SOEs), but gradual reforms are under way that add up to significant changes. The government is consolidating state control in strategic industries, such as advanced manufacturing, but in the remaining areas is implementing market-based reforms that allow private investment in SOEs and force them to compete with private firms.

Impacts

• SOEs providing public goods will stay under state control but may outsource to private firms to improve efficiency.
• Investing in SOEs is not always a safe bet; some will be allowed to fail.
• Competitive SOEs will make acquisitions of private firms, extending the state’s reach through market transactions.