Reform of the state-owned enterprises is one of the key challenges for China’s economic survival, argues Fudan professor and economist Zhang Jun in the China Daily.
The most important measures to take are to adjust the relationship between the State-owned and non-state economy and to acknowledge the function investment has in economic development.
A tenet of the Austrian School of economics is that government should not interfere with the economy. However, we acknowledge that the market is immature in its early stages and may need government to play a role.
In China the state-owned enterprises have grown so quickly that they directly affect the business environment of small and middle-sized companies, and now is the breakthrough point for the next round of reform.
China needs to adopt supply-side economics, the kind of policies put into effect by the US president Ronald Reagan in the late 1970s and early 80s. Such policies aim to increase the returns and efficient investment of enterprises, especially non-state ones, by reducing taxes and financing costs, deregulation, breaking the monopoly of big state-owned enterprises, promoting the marketization of interest rates and improving market competition. When an economy reaches a certain point, big enterprises become monopolies with little competition, making many industries inaccessible to others. One of the keys of supply-side economics is deregulation, which encourages competition, breaking up big enterprises, lowering access barriers and establishing a multi-level financial system to match diversified industries.
The Hu Jintao tenure has been labelled as a harmonious society. But it has not been as harmonious as planned, we argued at the China Weekly Hangout on November 1.
- Grabs for Power Behind Plan to Shrink Elite Circle (nytimes.com)
- China’s state-owned investors are new reality (metronews.ca)
- Leading Chinese economist says China should lower GDP target to 7% (mining.com)
- China’s State-Owned Enterprises Not The Villains We’ve Been Told They Are (lookingbeyondborders.com)