***** Date: Tue, 26 Oct 1999 18:59:09 -0400 To: marxism at lists.panix.com, pen-l at galaxy.csuchico.edu, leninist-international at buo319b.econ.utah.edu From: Louis Proyect <lnp3 at panix.com>
Louis,
Please post this on the Marxism list, LBO and Pen-l. It is an example of the struggle going on in influencing Chinese economic policy. Sorry I am too busy to be a subscriber. Hope to be able to return after a while.
The full name of Jainyi is omitted because he used to be a Foreign Ministry official.
Regards,
Henry *************************************************************************
Henry:
I completely agree with you. In my article delivered to one of the members of the standing committee of the politbureau of CPC in last April, I explained with ample examples and history of state-owned enterprises both in China and West (including the US and western european countries), and with theories, too, that the success of an enterprise has nothing to do with the ownership structure but with the corporate governance and management of the enterprise. During my approxmiately three years' of research, I discussed this issue with over one hundred Chinese and foreign experts, scholars and managers, most of them agreed with me after discussion. I remember vividly my discussions with a senior vice president of a Fortune 500 company and he agreed with me. I feel that the Chinese leaders are just trying to hide their failure in managing the state-owned enterprises behind the so-called reform theories. Because they do not have the skill, knowledge and courage needed to govern, improve and manage the state-owned enterprises.
The task we are facing now is how to make our views (which I think are correct) known to the Chinese people and leaders. We need to do something.
Best regards.
Jianyi
>----------
From: Henry C.K. Liu 'ù¤l¥ú[SMTP:hliu at mindspring.com]
Sent: Monday, October 25, 1999 11:45 PM
Subject: SOE Reform
The Decision on Some Major Issues Concerning the Reform and Development of State-Owned Enterprises (SOEs) adopted by the Fourth Plenary Session of the 15th Central Committee of the Communist) Party of China (CPC) made several assumptions that may not necessarily be valid.
1) It assumes that private corporations are more efficient than state-own enterprises. This is not always true. Experience in the US has shown that efficiency of an enterprise is the result of good or bad management, rather than whether an enterprise is publicly or privately owned. Accountability for management must be present in any enterprise. It can be introduced regardless of the type of ownership. Privatization is not a panacea. Russia is full of examples where privatization has resulted in total paralysis of many critical sectors of the Russian economy.
2) It is a myth that market economy is more productive than centrally planned economy. That myth had been promoted by Reagan/Thatcher. That myth requires the exploitation of an underdeveloped third world to carry the advanced economies. As a developing economy, following market fundamentalism will only condamn China to the rank of the exploited in the US led globalization regime.
3) Private ownership is not socially benign. Once a nation permits the privatization of the means of production, the road to socialism becomes obscure. Privatization is not economically more efficient. It only appears so because private corporations are not required to assume social responsibilities.
The Chinese state-owned enterprises need reform. But it is doubtful that privatization is the answer. An accountable mangement system in which managers are rewarded and punished according to performance is needed. But that does not require private ownership. There are many companies in the US that operates on mutual ownership, owned by the customers, like a cooperative. A well-known example is the Prudential Insurance Company of America, the 3rd largest insurance company in the US.
Henry
>From the People's Daily
Establishment of Modern Enterprise System-Orientation of SOE Reform
This article is written by Chen Qingtai on what he has gained from studying the Decision of the Fourth Plenum of the 15th CPC Central Committee. The article runs in part as follows:
The Decision on Some Major Issues Concerning the Reform and Development of State-Owned Enterprises (SOEs) adopted by the Fourth Plenary Session of the 15th Central Committee of the Communist) Party of China (CPC) once again stresses: "Establishment of a modern enterprise system is the inevitable requirement for the development of socialized mass production and a market economy, the effective way for integrating the system of public ownership with the market economy and the orientation of the reform of State-owned enterprises."
Problems Needed to Be Resolved in the Establishment of a Modern Enterprise System
1. Realizing the separation of ownership from the property right of the enterprise's legal person, enabling the enterprise to become an independent mainstay of the market.
2. Establishing a limited liability system, changing the debt responsibility relationship between the State and the enterprise.
3. The diversification of stock rights helps put owners' functions in place and form a power mechanism and risk restraint mechanism for the enterprise.
4. Establishing a State-owned enterprise asset circulating mechanism through reform in line with a corporation system.
5. Widening financial channels and enlarging the functions of State-owned capital.
6. Establishing an enterprise corporate management structure, forming a scientific and rational enterprise leadership structure and an organizational system. Several Difficult Problems Needed to Be Resolved in Establishing a Modern Enterprise System Since it is necessary to comprehensively solve the deep-seated institutional problems of State-owned enterprises through the establishment of a modern enterprise system, then system innovation is by no means an easy matter. Simply changing State-owned enterprises into firms cannot solve any problems.
Judging from the establishment of a modern enterprise system in selected areas, enterprise system innovation requires that supporting reforms must be done well. The Decision calls for mainly tackling the following four links:
1. Continuing to promote the separation of the government from the enterprise.
The separation of the government from the enterprise means: First, the government, as the manager of the macro-economy, no longer directly intervenes in the daily operational activities of the enterprise; second, as the owner, the government must, through a set of systems, arrange representatives of the owner to enter the enterprise and ensure that power and function are in place; third, the government undertakes the functions of social management and public service, and must create conditions for relieving enterprises of the function of running social undertakings.
2. Actively exploring effective forms for the management of State-owned assets.
3. Conducting reform of large and medium-sized State-owned enterprises in line with a standard corporate system.
(1) More State-owned enterprises should be restructured into diversified share-owners' limited liability companies.
(2) The company's corporate management structure is the heart of the corporate system.
4. Market-oriented transformation of the operational mechanism.
The effects of enterprise system innovation are embodied in the operational mechanism that suits the market economy.
Louis Proyect Marxism mailing list: (http://www.panix.com/~lnp3/marxism.html)