Shareholding System Reform in China
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Shareholding System Reform in China

Privatizing by Groping for Stones

Shu-Yun Ma

Since the 1980s, there has been a global wave of transfer of state assets to private hands. China is a relatively late participant of this worldwide trend, yet, in the last decade it has emerged as one of the largest privatizing countries. Shu-Yun Ma argues that China’s privatization is not based on any grand blueprint; rather, it is privatization by ‘groping for stones to cross the river’, a well-known metaphor often attributed to Deng Xiaoping, meaning that the reform simply proceeds on a trial-and-error basis without being guided by any theory.
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Chapter 4: The Role of Spontaneity and State Initiative in the Shareholding System Reform

Shu-Yun Ma


1 INTRODUCTION At the 15th Chinese Communist Party Congress held in September 1997, the shareholding system (‘gufenzhi’) was endorsed as the ‘mainstream reform programme’ for the Chinese state-owned enterprises (SOEs) (MB, 12 September 1997). The decision came twelve years after the first industrial shareholding enterprise (SHE) appeared in the small, light-industrial city of Foshan, located in south China. It was a spontaneous attempt made by the workers of the factory. Ironically, this pioneer enterprise was also the first industrial enterprise in the city to declare bankruptcy, shortly before the official approval of the shareholding system at the national level. How could a reform programme be adopted right after its first experiment had failed? What implications does the case have for our common perception of China’s trial-and-error approach to reform? Does it show that the strategy of ‘groping for stones to cross the river’, as often cited by Chinese leaders, is or is not working? If incrementalism is the best way to describe China’s transition, what actually happened during the incremental period? Most importantly, what role have spontaneity and the state played in deciding the final reform plan? In this chapter, we tackle the above questions by focusing on the relation between spontaneous attempt and state promotion. The chapter first situates the issue in a theoretical context defining the role of the state in the reform. Two contrasting images of the Chinese state are be identified, and from each a hypothesis is derived about the relative importance of spontaneity and state...

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