From Federalism, Chinese Style, to Privatization, Chinese Style

Stanford Economics Working Paper No. 97-049

37 Pages Posted: 6 Feb 1998

See all articles by Yuanzheng Cao

Yuanzheng Cao

Institute of Economic System Reform, China

Yingyi Qian

Tsinghua University - School of Economics & Management; Centre for Economic Policy Research (CEPR)

Barry R. Weingast

Stanford University, Department of Political Science

Multiple version iconThere are 2 versions of this paper

Date Written: December 1997

Abstract

In 1994 China began a profound reform of its state-owned enterprises. We first describe and characterize this progress in two areas: privatization of small state-owned enterprises at the county level and mass layoffs of excess state workers at the city level. Local governments have initiated these reforms, which are proceeding in economically and politically sensible ways. We then argue that privatization, Chinese style, rests on an adequate economic and political foundation--federalism, Chinese style. We suggest a range of incentives that propel local governments toward SOE reform, including their harder budget constraints and increased competition from the non-state sector. In this sense, federalism, Chinese style, has induced privatization, Chinese style.

JEL Classification: P2, P5, H3

Suggested Citation

Cao, Yuanzheng and Qian, Yingyi and Weingast, Barry R., From Federalism, Chinese Style, to Privatization, Chinese Style (December 1997). Stanford Economics Working Paper No. 97-049. Available at SSRN: https://ssrn.com/abstract=57564 or http://dx.doi.org/10.2139/ssrn.57564

Yuanzheng Cao

Institute of Economic System Reform, China ( email )

State Commission for Restructuring
the Economic System
Beijing
China

Yingyi Qian (Contact Author)

Tsinghua University - School of Economics & Management

Beijing, 100084
China

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Barry R. Weingast

Stanford University, Department of Political Science ( email )

Stanford, CA 94305-6010
United States
650-723-0497 (Phone)
650-723-1808 (Fax)

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