State-Owned Enterprise Reform

• Pages: 219

Page 219

China's economy includes more than 300,000 state-owned enterprises, which account for an estimated one-third of GDP and gross industrial output and as much as half of the value of national fixed assets (excluding land). These enterprises employ 13 percent of the economically active population and contribute an estimated 70 percent of total general government revenue.

The economic performance of state-owned enterprises has deteriorated in recent years, lagging behind the nonstate sector, as evidenced by falling profitability, increasing losses, growing industrial inventories, and low rates of capacity utilization in some sectors. One of the main reasons for this decline is the dynamic growth of the nonstate sector since the start of China's reforms in 1978. This has generated greater competition in many industries and exposed the inefficient use of resources in parts of the state-owned economy.

In response to these developments, the authorities have begun to accelerate state-owned enterprise reforms during the past two...