Chinese way of reforming an enterprise system : Characteristics in comparison with East European reform

Socialist countries had been making efforts for a long time in order to change their enterprise system into more efficient one. Privatization of state-owned enterprises is one of the most current and important strategies to achieve this goal. However, there is a crucial difference of policies between China and East European countries. East European countries have already terminated a socialist planned economy. They are now in the process of conducting transition economy and establishing a fully capitalistic free-market system. As the part of this transition, they are trying to change in principle all of state-owned enterprises to private ones. Chinese government declares that they aim to build up a socialist market economy. Although they now permit state-owned enterprises to issue and sell stocks in a market, they don't intend that all of them shall be fully privatized. They don't want to give up central control over enterprises. It seems that state-owned enterprises still remain for a while in China. However, as regards methods of creating market-oriented actors, privatizing state-owned enterprises is not only one way. Another way is to let entrepreneur and investos set up a new company. China adopts this way, introducing direct investments of foreign capitals. In Short, China takes two-truck policy. They separate ownership from management of a state-owned enterprise and privatize its management activities as much as possible, emphasizing management autonomy and responsibility on self-paying basis. At the same time, they promote setting up new private comapnies which operate independently of a governmental planning. So that we can say that China's economy is now composed of two diffrent sectors, namely planned and non-planned one. It is undoubtly said that the latter is a principal driving force for high growth of Chinese economy. The problem is, however, that the number of state-owned enterprises which are making only loss is estimated at least a third of total ones. As far as these enterprises are concerned,