China’s Mixed-Ownership Enterprise Model 混合所有制?

China’s Mixed-ownership Enterprise Model: Can the State Let Go? I came across this short essay published on the website of the Wharton School of Business of the University of Pennsylvania (Link: http://knowledge.wharton.upenn.edu/article/will-chinas-mixed-ownership-enterprise-model-work/). The essay introduces paper titled “Making Ownership Matter: Prospects for China’s Mixed Ownership Economy“. The paper was co-authored by Marshall W. Meyer and Wu Changqi. Some interesting points:

  • The mixed ownership model is introduced to attract private investments in its 113 centrally owned SOEs and numerous local SOEs. (WJY: Is this the only purpose? It is also intended for privatizing SOEs? And improve corporate governance of SOEs?)
  • This model is however not new. (王江雨: that’s very true). China created a “halfway house” or a hybrid structure called a “legal person entity” to allow the state to reduce its ownership but retain control of companies. (王江雨: but how?)
  • “To most observers, there will appear to be private companies, but Thye are state controlled entities – and when why are [state controlled] they might as well be state owned … It is a waffle”. (王江雨: Somebody should be arrested to disclosing state secrets, hahaha).
  • The current financial problems faced by Chinese SOEs today were resulted from teh 2008 stimulus programme. Really?
  • The paper cites a survey that found 90% of private business leaders felt they would have no confidence that the mixed ownership model would give them influence as board members of such SOEs. “No matter how many shares are privately owned, the decision lies with the state.”
  • Major highlight of the paper: Mismatch between the levels of ownership and control in mixe-ownership enterprises.
  • Alibaba: controlled by a group of minority shareholders (and executives). “People buying Alibaba shares listed in the US may not have control rights”.
  • Question of mentality: capitalism (you operate for your shareholders) vs. socialism (for the whole people).
  • The prospects for a mixed owenership economy will ultimately depend on the state’s willingness to cede control.
  • There is no time to lose …

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