Privatisation in China:Softly, Softly Does It

This paper examines China's record of privatisation to assess whether it accords with popular perceptions in India of that country having proceeded vigorously with such a programme. The record shows that China has moved cautiously in its privatisation efforts. It has privatised only the smaller state-owned enterprises, and the state retains control over the larger ones. Over a period, China has also pushed through reforms of SOEs, and the empirical evidence is that their performance has improved consequent to such reforms. It could be argued that fullblooded privatisation might have produced even better results. However, given the possible implications in terms of job losses as well as the absence of effective governance mechanisms in China's underdeveloped capital market, its rulers may well have been justified in hastening slowly with privatisation.