China’s State Enterprises Changing Role in a Rapidly Transforming Economy RAN LI & KEE CHEOK CHEONG China’s State Enterprises “Li and Cheong have written a very important and highly readable book The conventional wisdom about SOEs, like most Western writing on China, sees the latter through a Western prism The result: it has got China wrong for almost four decades In contrast, they ground their nuanced argument in Chinese reality rather than Western assumption They show that the differences between state and private enterprises are blurred and the intrinsic role SOEs have played in China’s transformation.” —Martin Jacques, Author of the global best-seller When China Rules the World: the End of the Western World and the Birth of a New Global Order Ran Li • Kee Cheok Cheong China’s State Enterprises Changing Role in a Rapidly Transforming Economy Ran Li Institute of China Studies University of Malaya Kuala Lumpur, Malaysia Kee Cheok Cheong Institute of China Studies University of Malaya Kuala Lumpur, Malaysia ISBN 978-981-13-0175-9    ISBN 978-981-13-0176-6 (eBook) https://doi.org/10.1007/978-981-13-0176-6 Library of Congress Control Number: 2018943396 © The Editor(s) (if applicable) and The Author(s) 2019 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations Cover illustration: © travel images / Alamy Stock Photo Cover design by Tom Howey Printed on acid-free paper This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd The registered company address is: 152 Beach Road, #21-­01/04 Gateway East, Singapore 189721, Singapore Preface The year 2018 marks the 40th anniversary of China’s “Reform and Opening-up” policy launched by Chairman Deng Xiaoping This opening up is striking not only because it represented a complete reversal of the policy of isolation and “self-reliance” implemented during Mao Zedong’s nearly three decades of rule, but equally because it seized the imagination of China’s observers, especially Western, with the promise of a China that will embrace democracy and surrender to the dictates of market economics Forty years on, China has indeed opened its economy to competition, and new reforms of state enterprises have just been announced However, rather than letting the market rule the economic transactions, China has taken, to use Robert Wade’s words for the title of his book, to “governing the market” Far from retreating, the state has thrown its weight behind its enterprises, enabling some to become world leaders in their respective areas of business China has learned capitalism well, but is practicing state-­ led capitalism As for embracing democracy, there has been scant evidence of convergence to Western norms Yet, this alternative model that challenges the very core of “mainstream” political and economic governance has produced over three decades of spectacular and uninterrupted economic growth, earning China the reputation of “economic powerhouse” How can this apparent paradox be explained? This book, about China’s state enterprises, key institutions of the state that, given their importance, undoubtedly figure prominently in the country’s economic growth, attempts to offer an explanation Expanded and updated from a PhD ­thesis written by the first author, it takes a revisionist view, arguing that v vi   Preface much of the criticism leveled against the China “model” is based on mistaken premises, particularly that Western assumptions of the role of the state and its enterprises are universally applicable and hence relevant to China Arising from these assumptions are, first, the clear separation between state and civil society and second, that state enterprises are necessarily inefficient by virtue of ownership The book challenges these assumptions and views It does this by integrating Chinese history into the narrative, emphasizing, in particular, the antiquity of the Chinese state which well predates the concept of nation state, now used to characterize all states, and the very notion of democracy itself This does not mean that the Chinese reject foreign concepts But historians have long recognized, much more than economists today, that China has always looked primarily to its long history for lessons as guides for action, adapting and assimilating foreign concepts to fit the Chinese condition It also draws upon Chinese history to argue against the assumption of a clear state-society divide arguing that given the importance of “Guanxi” (relationships) this divide is less important than often assumed It highlights the Chinese state’s shift towards owning fully only enterprises considered strategic, controlling others through equity or through relationships with enterprise leaders, and allowing the remainder to be privatized or liquidated And it cites alternative Western theories that support a larger role for the state than that envisaged by neoliberal arguments Recognizing that even these cannot fully reflect the Chinese context, it argues for acknowledging China as a historical and/or civilization state These themes are brought into sharper focus via case studies of a 100% state-owned bank, the history of which explains China’s insistence on ownership of major financial institutions, and of a state-owned enterprise that was gradually transformed by state-enterprise reforms into a state-­controlled but market-oriented enterprise Such an enterprise-level (bottom-­up) view is seldom written about Updating and expanding the state enterprise story is important for several reasons First, being current is very important given the rapidly shifting landscape of China’s enterprise reforms That these continue to be enacted over a 40-year period testifies to the gradualist approach adopted since 1978 but more importantly attests to the attention the Chinese state continues to confer upon its enterprises Second, the “Going Out” Strategy and especially the Belt and Road Initiative clearly point to the state’s reform efforts being directed to strengthen the state enterprise s­ ector rather than diminish its role This role consists increasingly of serving the country’s  Preface     vii strategic interests, both of technological and know-how acquisition and of expanding global influence, a role few if any other state enterprise in the world is called upon to perform Readers of this book will notice a Malaysian slant in the narrative This is partly because both authors are currently based in Malaysia but also because as a node in China’s Maritime Silk Road and a founding member of ASEAN, Malaysia can serve as a regional base for Chinese enterprises as they expand in the ASEAN region Thus, both case studies of state enterprises have internationalized their operations to Malaysia China’s future plans to leverage its state enterprises in this region, as well as the response of Southeast Asians to China’s growing role, will be an interesting subject for future research In writing this book, we acknowledge with much gratitude Professors Edmund Terence Gomez and Danny Wong Tze Ken who motivated us to turn the thesis into a book project An intellectual debt is also owed to Martin Jacques whose writings and expressed views are consonant with ours in this volume We also acknowledge Professor Rajah Rasiah who provided valuable advice during the first author’s PhD study, as well as Professor Dwight H. Perkins who was very supportive to this book To our many colleagues at the Institute of China Studies, University of Malaya, we acknowledge their contributions through the many discussions we had with them We are also grateful to an anonymous reviewer of our manuscript appointed by the publisher Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia  Ran Li Kee Cheok Cheong Contents 1 Introduction   1 1.1 The Chinese State and Economic Growth  1 1.2 State Enterprises as Central Institutions  3 1.3 Why Study State Enterprises?  5 1.4 Lines of Enquiry  6 1.5 Discourse Methodology  8 1.6 Structure of This Book 10 References  15 2 China’s State Enterprises—Theories and Evidence  17 2.1 Introduction 17 2.2 Mainstream Theories on Public Enterprises 19 2.2.1 Agency Theory 19 2.2.2 Property Rights Theory 20 2.2.3 Public Choice Theory 21 2.2.4 Neoliberalism 21 2.3 Empirical Studies Supporting Mainstream Theories 22 2.4 In Defense of State Enterprises—Alternative Theories Integrating the Role of the State 28 2.4.1 Minsky’s Financial Instability Hypothesis 29 2.4.2 Economic Embeddedness 29 2.4.3 Market Socialism 30 2.4.4 Developmental State 31 ix x   Contents 2.5 China as a Historical State 32 2.6 Conclusion: A Critique of Existing Mainstream Literature 34 References  36 3 State Enterprises, Economic Growth, and Distribution  43 3.1 Introduction 43 3.2 Understanding State Enterprises—The Chinese State in Historical Context 44 3.3 State Enterprise Reform: A History of Major Transformations 48 3.4 Characterizing China’s State Enterprises: Ownership, Governance, and Performance 58 3.4.1 Ownership 60 3.4.2 Governance 61 3.4.3 Performance 63 3.5 The State Enterprise Sector and Economic Growth 66 3.6 State Enterprises and Social Protection: Missing in (Research) Action? 68 3.7 Conclusion 73 References  78 4 The State’s Role in a Strategic Industry—China’s Banking Sector  87 4.1 Introduction 87 4.2 China’s Banking Sector—A Historical Perspective 89 4.2.1 The Qing Dynasty and British Economic Power 89 4.2.2 The Establishment of the Bank of China (BOC) 91 4.2.3 The Change of Government After the Qing Dynasty 91 4.2.4 The Establishment of the Central Bank of the Communist Party 93 4.2.5 The Evolution of Chiang’s Financial Autocracy 94 4.2.6 The Collapse of Chiang’s Financial Autocracy 95 4.3 From Isolation to Banking Reform 97 4.3.1 Dissociation of the Big-Four State Banks from the State, the Emerging Joint-Stock System and Corporate Governance Structure (1979–1997) 98 4.3.2 Further Joint-Stock Reform by Listing (1998 to the Present) 99  Contents     xi 4.4 The Current Situation of China’s Banking Sector103 4.4.1 Ownership105 4.4.2 Governance108 4.4.3 Performance110 4.5 Answering the Government’s Call110 4.5.1 China’s Entry into the WTO113 4.5.2 Penetrating Global Financial Markets114 4.5.3 Global Financial Crisis115 4.6 Conclusion117 References 121 5 China’s “Commercial” State Enterprises—A Case Study of ZTE Corporation 127 5.1 Introduction127 5.2 Rationales for Choosing ZTE Corporation128 5.3 ZTE Corporation—A State Enterprise in Transition129 5.4 Ownership and Control, Governance and Control133 5.4.1 Ownership Changes133 5.4.2 Corporate Governance137 5.5 Relations with the State139 5.6 Corporate Performance143 5.7 Conclusion145 References 148 6 “Going Out”, Going Global, and the Belt and Road 151 6.1 Introduction—From Investment Destination to Investor151 6.2 “Going Out”—The Decision to Invest Internationally154 6.2.1 Internationalization and FDI Theories155 6.2.2 Does Chinese OFDI Fit These Theories?157 6.3 The State, State Enterprises, and “Going Out”160 6.3.1 State-Level Motives for OFDI161 6.3.2 Enterprises “Going Out” and Chinese State Priorities163 6.4 Phases of “Going Out”166 6.5 State Enterprise Internationalization—Two Case Studies168 6.5.1 Case 1—Bank of China, a Strategic Enterprise169 6.5.2 Case 2—ZTE Corporation, a Market-Oriented State Enterprise172 202   R LI AND K C CHEONG forefront of innovation and comparable to firms in developed countries At the same time, because of the large numbers of state enterprises that exist at various levels of government, non-strategic state enterprises were facing intense competition created as much by other state enterprises as by non-state sectors and foreign firms The competitive conditions facing state and non-state enterprises were thus converging, a development invariably ignored by critics of China’s state enterprises Thus, government preferential treatment comes with intense competition With the government’s “Going Out” strategy, state enterprises have also gone international and faced even more fierce competition In the reform process, different routines have resulted in different corporate entities As a result, some were successful while some were not Successful entities might be criticized for being the subjects of state favoritism The number of successful entities is not known and may be a small proportion of the total, but in terms of size and share of industrial output, they are likely to be significant The reason for this is that they are typically listed companies and national champions The results may not permit categorization of the Chinese state enterprise sector as profitable, innovative, and competitive, but the argument that the state sector is inefficient can be decisively rejected Also, as already indicated, the notion that there is a clear distinction between private and state enterprise also cannot be applied For strategic state enterprises, the overall performance was considered good Nevertheless, it had to be linked to the government policies such as for the banking sector which is to a great extent attributable to transfers of bad assets to Assets Management Companies, loan growth, recapitalization, write-offs, and China’s strong economy Listings on stock exchanges and international competition have mandated these banks to conform to international corporate governance benchmarks Moreover, the GFC that decimated banks in the West had propelled them up the global rankings While unfavorable comparisons of these institutions with fully private financial institutions continue to be made and have some merit, the sub-­ optimal performance of these Chinese banks could be a matter of conscious choice made by the Chinese state, which is prepared to bear the costs to have these banks continue to be instruments of state policies Efforts to strengthen efficiency of banks represent the state’s efforts to minimize these costs These statements are likely to be true of state enterprises in general, given they are vital instruments of the model of state capitalism that China has embraced  CONCLUSION   203 ZTE Corporation, as a representative of the group of “commercial” state-holding enterprises, has sustained profitability thanks to its ability to take advantage of the government’s drive for indigenous innovation Its record of accomplishment for innovation is reflected by the number of patent applications as well as by its leading role in various products and services technology innovations By innovating domestically and introducing international technologies, it was recognized and rewarded by the Chinese government and other countries Facing a domestic competitive environment, the enterprise has used a combination of “insiders” who are familiar with the enterprise and the employment of professional management that has ensured acceptable governance standards In addition to professionalism in management, links with the state have brought the Corporation a range of benefits from preferential access to business opportunities that have also played an important role in improving its efficiency 7.3   Into the Future From the discussion in earlier chapters of this book, summarized in the previous section, it is clear that rather than a piecemeal half-hearted attempt at reform, the government has embarked upon a gradual but systematic process to strengthen state enterprises This process began with allowing greater managerial responsibility with incentives to reward performance to improve enterprise efficiency, and continued with disposing of loss-making enterprises through sale, privatization, or closure to consolidate the sector The decision to “grasp the large, releasing the small” then represented further consolidation to ensure state enterprises achieve sufficient scale to compete in the market Thus reformed, state enterprises would be able to stand on their own feet, but supported no doubt by state contracts directed their way And when the GFC struck, it was primarily the state enterprise sector that was the beneficiary of the fiscal stimulus As China’s domestic market competition intensified and corporate margins squeezed, the announcement of the “Going Out” strategy facilitated the internalization of state enterprises to compete in global markets and acquire technology through mergers and acquisitions (M&A) Although not meant for state enterprises alone, these enterprises are more ready to respond to the government’s strategy because the support of the state is guaranteed 204   R LI AND K C CHEONG This major move has significance far beyond giving state enterprises a leg up in competition First, it represents the emergence of globally competitive Chinese enterprises that can also match Western and Asian advanced economies’ (Japan and Korea) transnational corporations in size And this is occurring within an international economic order created by the US after World War Two Indeed, with Chinese state (and non-­ state) enterprises working in tandem with state banks, they are able to offer terms advanced countries’ transnational corporations cannot match Second, the more projects these enterprises are able to snare, the greater their expertise and competitiveness Third, because Chinese overseas FDI is frequently bundled with official development assistance, state enterprises have also become the Chinese government’s instruments of soft power projection State enterprise internationalization is taken a step further with the launch of the BRI in 2013 As already indicated, the BRI, if and when it comes to fruition, has the potential to change the international economic order to China’s advantage This engagement with countries in Eurasia and South and Southeast Asia will mean even greater projection of soft power through Chinese state enterprises The fact that the bulk of the projects under the BRI consists of infrastructure and construction means Chinese enterprises will not only strengthen their already formidable competitiveness but also earn additional revenues for themselves and the government And to be implemented over decades, the BRI will entrench the role of state enterprises for years to come 7.4   Final Thoughts This book’s revisionist narrative has raised questions about the applicability of Western theories to the Chinese context In this final section, we revisit this issue The specificity of the Chinese context also raises questions as to whether the Chinese system has relevance for the rest of the world This is the second issue we take up 7.4.1  The Applicability of Extant Theories The specific context of China means that even if partially valid, Western theories of public enterprise must be modified to consider the unique nature of the Chinese state and society This means many arguments based on prevailing theories must be revisited and judgments revised For  CONCLUSION   205 instance, the assumption that state enterprises are run by bureaucrats is invalid because many Chinese state enterprises, especially those listed on stock exchanges, are not run differently from private enterprises, and actually pay better and attract the best talent The assumption that state enterprises are monopolies is also invalid In China, many state enterprises compete fiercely among themselves and with the non-state sector The result has been management professionalism and innovation capabilities for an increasing number of state enterprises, which contradicts the stereotype perception of uncompetitive state enterprises Even more fundamental has been the assumption that the state and private sectors are distinct For China, the boundaries are not distinct The non-state sector is not all private, and includes Town and Village Enterprises (TVEs) and collectives The state sector has ownership interests in enterprises to different degrees, and also been given large doses of private sector management To make things even more opaque is the de facto separation between ownership and control, with the former declining and the latter in the hands of professional management for the most important enterprises This is producing, in effect, a system, many characteristics of which are not that different from Western models This lack of a clear partition between public and private enterprises has produced apparent paradoxes that Western economic theories, such as agency, public choice, property rights, have been unable to explain However, while alternative theories, such as economic embeddedness, market socialism, and developmental state, have relevance, they are also not wholly applicable This is likely because these alternative theories have also been developed to explain situations at variance with what exists in China The most obvious example is that of the developmental state Applied initially to Japan and then to Korea, it envisages extensive state intervention to shape the competitiveness of the private sector, which is envisaged to be the driver of economic growth In China’s case, despite expectations by many for a greater private sector role, it remains the state that is in the driver’s seat More fundamentally, none of these theories has accommodated a situation in which the state is at the apex of an orderly hierarchy in which layers of society make up the rest of the pyramid Nor any of these models envisage a role of the state as expansive as that of the Chinese state throughout its history However, what is indisputable is that with its millennia of history providing lessons for the state’s decision-making processes in general and 206   R LI AND K C CHEONG state enterprises in particular, total reliance on economic arguments can provide only partial explanations of the behavior of the Chinese state and its enterprises For instance, decisions made to keep the banks under state control have as many historical antecedents and strategic priorities as any economic considerations of rationality and efficiency It may well be that with this complexity, with a wide span of state control though ownership and governance, developing a theoretical framework for all Chinese state enterprises is a herculean task It is even unclear if such an endeavor is a meaningful pursuit, given the limited applicability of such a framework outside China A more meaningful academic pursuit may be to seek greater in-depth understanding of key sectors like telecommunications or key areas like innovation that are likely to impact economies well beyond China’s shores Finally, with Chinese state enterprises given an ever-growing role, any assessment of their role must take into account all dimensions of their role These would include supporting state strategy, advancing soft power, all non-economic factors Assessment based on purely economic considerations of efficiency would be totally inadequate 7.4.2  Lessons for Other Countries Even if China’s historical trajectory cannot be emulated, China’s experience has implications for other countries The Chinese state is still the key agent that cares for the macro economy and its institutions and has a vital role to play in this regard This is also the case in developing countries where information and other asymmetries create all manner of negative externalities that the state must overcome However, the China experience shows that the emphasis on ownership may be misplaced The essence of the state’s role is control In this sense, the importance attached to privatization may be exaggerated on the one hand while resistance to its implementation may likewise be overdone on the other Second, a number of ways exist to improve performance of state enterprises of all shapes and sizes One way adopted by China is listing on ­foreign stock markets This imposes market discipline on the listed enterprises, while the fact that listing is done overseas removes the ability of the state to interfere in the enterprises’ governance Another is to emulate the Korean example of setting mandatory performance benchmarks as conditions for state favor Like the Korean model but unlike the Japanese, the state, through its 100% ownership of the largest banks, controls the sources  CONCLUSION   207 of finance for its state enterprises While some of the largest state enterprises have put this to good use, in the many breaches of this rule that have been widely reported lies also a negative lesson for other countries, suggesting the difficulty of adopting this model in a relationship-based corporate environment Third, the Chinese experience offers lessons on how state enterprises can share if not take the lead in technological innovation Detailed planning for technological upgrading with a specific role for the state is accompanied by implementation in accordance with these plans Within this planning framework, Chinese enterprises that innovate are rewarded by various benefits Although outside the scope of this book, that ability rests on the growing depth of China’s human resource pool Emulating China would require considerable effort toward augmenting human resources Finally, lessons from China cannot be learned as long as there is denial that the Chinese model, with state enterprises at its core, represents a viable alternative, at least for China, to the Western democratic, market-­ driven model Such denial is rooted in quite extensive contemporary writing on China, especially with the country’s ascendancy which is increasingly viewed with alarm.2 The Chinese state and its enterprises has its own flaws, but just like the liberal order of the West, has lessons for the rest of the world Those who deny this reality should be reminded of the fact that not too long ago, the Chinese kingdom considered itself superior to and refused to learn from the “barbaric West” The result was “a hundred years of shame” for China China has moved on since, absorbing from the West what it believed to be beneficial to its own development But for those in denial, Churchill’s admonition: “Those who fail to learn from history are doomed to repeat it” is no less salient today Notes Among historians who expressed this view is Cambridge University’s Philip Kuhn, while economists who argued for differences between the Chinese and Western economies include Nicholas Lardy and Yukon Huang Huang’s latest book, Cracking the China Conundrum (2017), takes a contrarian view of China’s growth Lardy has also dismissed predictions of doom for China that were premised on the country’s rapid growth (Woetzel, 2015) 208   R LI AND K C CHEONG A good example is the Leader in the November 9, 2017, The Economist (2017) which lamented the dwindling of America’s global influence under Trump “America”, it says, “has long been the greatest force for good in the world, upholding the liberal order and offering an example of how democracy works” This has made it “more tempting for other countries to copy China’s autocratic model” References The Economist (2017) America’s global influence has dwindled under Donald Trump Retrieved from https://www.economist.com/news/leaders/ 21731132-presidential-tour-asia-cannot-hide-fact-america-has-turned-inwardhurting-itself?cid1=cust/ednew/n/bl/n/2017119n/owned/n/n/nwl/ n/n/ap/79430/n Huang, Y (2017) Cracking the China conundrum: Why conventional economic wisdom is often wrong Oxford: Oxford University Press Woetzel, J. (2015) reasons why China’s economy won’t collapse China Point Blog, McKinsey & Co China October 14 Retrieved from http:// mckinseychina.com/5-reasons-why-chinas-economy-wont-collapse/ Index1 A Accountability, 19, 21, 187n9 Administrative Bureau of State-owned Assets, 49 Aerospace System 691 Factory, 130 Alchian, Armen Albert, 20, 21 Aluminium Corporation of China (Chinalco), 64, 187n8 Asian Financial Crisis (AFC), 23, 66, 99, 117 “Asian security,”, 177 “Asia-Pacific Dream,”, 177 Asset management company, 67, 119 Asset stripping, 63, 69 Authoritarian rule, 1, 45, 47 Authorization management system, 53 B Bank (of) agriculture, 97–100, 102–104, 106, 107, 111, 112, 116, 120n9, 121n16 Beihai, 97 China, 91, 94–98, 100, 102–104, 111, 112, 114–116, 120n5, 120n9, 121n16, 169–171, 187n11 communications, 94, 95, 97, 98, 100, 102–104, 106, 110–112, 114, 116, 120n4, 120n5, 120n9, 121n16 development, 94, 99, 103, 106, 115, 142, 163, 175, 182 everbright, 99, 102, 103, 106 Export-Import, 99, 103, 182 Hang Seng, 114 Huabei, 97 Industrial and Commercial, 98, 100, 102–104, 106, 109, 111, 112, 114–116, 120n9, 121n16, 171, 187n12 People’s Construction, 98, 99 Xibei Farmer, 97 Banknote issuance, 90, 94 Baoshan Iron and Steel, 62 Basel Accord, 27, 100, 101, 109 Basic material processing, 143  Note: Page numbers followed by ‘n’ refer to notes © The Author(s) 2019 R Li, K C Cheong, China’s State Enterprises, https://doi.org/10.1007/978-981-13-0176-6 209 210   INDEX Beibu Gulf Economic Zone, 181 Beiyang, 91, 94, 97 Belt and Road Initiative (BRI), vi, 10, 14, 115, 170, 175–186, 188n19, 196, 204 Bilateral trade, 169, 170 Born global, 156, 168 Brand recognition, 168, 174 Buchanan, Allen, 21, 30 Budget constraint, 19, 23, 25, 69 Business group, 158 C Callahan, W.A., 177, 178 Capital adequacy ratio, 27, 99, 100, 110, 111, 121n13 Case study, vi, vii, 9, 13, 127–147, 168–175, 197 CDMA mobile phone, 172, 173 Cellular network, 174 Central Huijin Investment Ltd (Central Huijin), 100, 103, 106, 107, 110 Central planning, 18, 31, 57 “Chaipiao,”, 90 Chang, Gordon G., 2, 15n2, 43 Chiang Kai-shek, 92–97 Chief technology officer, 130, 138 China Aerospace Science and Industry Corporation, 135, 136 China Aerospace Science and Technology Corporation, 135 China Banking Regulatory Commission (CBRC), 56, 99–101, 103, 104, 108–110, 120n11, 121n13, 121n14 China CAMC Engineering Co Ltd (CAMCE), 183 China-centric, 176 China Chemical National Corporation (ChemChina), 63 China Communication Construction Company (CCCC), 183 “China Dream,”, 177 China Insurance Regulatory Commission (CIRC), 57, 100 China International Marine Containers, 62 China Mobile, 75n8, 129, 141, 172 China Securities Regulatory Commission (CSRC), 51, 57, 100, 107, 133 China State Construction Company, 72 China State Construction Engineering Corporation Limited (CSCEC), 72, 183 China Telecom, 141, 172, 201 China Unicom, 76n10, 141, 172 Chinese Communist Party, Chinese People’s Political Consultative Conference, 108 Chomsky, Noam, 22 Civil society, vi, 11, 32, 44, 46–48, 59, 137 Coase, Ronald, 20 Collectivist views, 47 Command economy, 3, 46, 196 “Community of shared interests,”, 178 Compensation package, 71, 200 Competitiveness, 13, 30, 34, 52, 56, 62, 67, 73, 98, 145, 155, 161–163, 168, 170, 176, 196, 200, 204, 205 Confucianism, 9, 10, 45–47 Conglomerate, 31, 53, 56, 60, 67, 77n23, 167, 183, 200 Control diversified, 145 private, 145 state, xix, 5, 6, 12–14, 25, 26, 29, 32, 34, 35, 48, 61, 88, 89, 97,  INDEX     101, 110, 118, 127, 133, 138, 139, 142, 143, 145, 146, 158, 160, 168, 174, 184, 198, 199, 206 Corporate governance, 26, 53, 62, 75n7, 76n15, 98–102, 108, 118, 137–139, 164, 198, 202 Corporate social responsibility, 72, 78n32 Corporatization, 49, 52, 71, 77n27, 98, 99, 101, 117, 118 Corruption, 3, 27, 36n1 Cost agency, 13, 20, 23, 146 bonding, 20 monitoring, 20 residual, 20 Credit transfer, 109 Customization, 173 D “Daqing” Bank, 91, 97 Debt-for-equity swap, 50 Debt forgiveness, 113 Decentralization, 60 Demsetz, Harold, 20, 21 Deng, Y., 175–177 DiGi, 174 Dorn, James, 66 Downs, Anthony, 21 Dunning, John H., 156, 157, 159, 164, 186n1, 187n3, 187n4 Dyer, Geoff, 64 E Eclectic Model, 156 Economics development, 24, 154, 182 liberalization, 4, 21, 89, 127, 137, 195 211 transition, 24, 57, 60, 63, 69, 153, 196 Efficiency-seeking, 156, 165, 167 End-to-end solution, 129 Enterprise group, 35, 50, 57, 65, 103 non-state, 3, 6, 7, 14, 59, 60, 63, 64, 66, 67, 69, 158, 184, 185, 198, 199, 201, 202, 204 private, 5–7, 11, 19, 21–24, 28, 44, 60, 62, 65, 66, 73, 91, 108, 130, 133, 135, 137, 142, 146, 158, 159, 168, 195, 205 public, 4, 7, 10, 17–23, 28, 48, 54, 63, 66, 73, 128, 146, 195, 197, 199, 204 quasi-state, 60, 198 state-holding, 7, 36, 54–56, 63, 128, 132, 135, 145, 198, 203 state joint-stock, 7, 36, 56, 198 state-owned, vi, 5, 7, 53, 54, 63, 64, 100, 135, 137, 158, 163, 166, 198 strategic, vi, 31, 36, 50, 57, 60, 163, 169–171 Environment institutional, 158, 164 physical, 8, 158, 164 Ethnography, 9, 197 Export, 2, 58, 142, 146, 151–153, 155, 161–163, 181, 182 Externalities, 35, 44, 69, 206 F “Fabi,”, 95, 120n6 Fama, Eugene, 29 Financial autocracy, 94–97 robustness, 89 Financial asset management company, 50, 67 212   INDEX Food adequacy, 68 Foreign aid, 154 Foreign Currency Management Committee, 96 Friedman, Milton, 96 “Fumuguan,”, 34, 45 G General Agreement on Trade in Services (GATS), 113 Generally Accepted Accounting Principles (GAAP), 139 Geostrategic, 176 Global communications network, 129 Financial Crisis (GFC), 7, 10, 12–13, 18, 23, 26, 29, 87, 89, 101, 109, 113–118, 153, 161, 201–203 mentality, 170 “Going Out” Strategy, vi, 6, 13, 15n5, 101, 113, 115, 153, 158, 161, 166, 167, 169, 172, 176, 185, 195, 201–203 Governance, v, 5–7, 11–13, 25–28, 33–35, 45, 48, 49, 53, 54, 56, 58–66, 72, 73, 88, 89, 98–103, 108–110, 118, 128, 133–147, 164, 177, 197–199, 202, 203, 206 Governance and control, 133–147 Government Beiyang, 91, 94, 97 Guangzhou, 91, 92, 97 Nanjing, 93, 94, 97 Wuhan, 91–93, 97, 120n3 Gradualist approach, vi, 4, 5, 31, 185 Guangzhou Metro, 62 Guangzhou Railway Corporation, 131 H Harvey, D., 22 High-tech, 141, 161 Historical research, Hong Kong Securities Clearing Company Nominees Ltd (HKSCCNL), 106, 107, 133, 136, 137 Housing Provident Fund, 71 Hou Weigui, 130, 139, 147n9, 172 H-share, 131, 134, 147n4 Hsiung, James C., 33, 45, 75n2, 75n5 Huawei, 76n19, 129, 143, 144, 146, 173, 184, 186, 187n8, 199, 201 “Hubu” Bank, 91 Hu Jintao, 27, 139, 140 “Hukou,”, 142, 148n19 I Ilheu, F., 158, 159, 162, 167 Indigenous innovation, 141, 143, 185, 203 Industrial capacity, 161 Industry-based view (IBV), 155, 187n3 Industry-University Research Institute Collaboration Forum, 141 Information asymmetry, 24 Infrastructure institutional, 164 physical, 164, 178, 182 “Insiders,”, 137, 138, 145, 203 Interlocking holdings, 60 International economic order, 13, 176, 204 Internationalization, 13, 14, 89, 101, 131, 144, 155–157, 160, 168–175, 181, 204 International Monetary Fund (IMF), 116, 117, 169  INDEX     Investment Development Path (IDP), 156–158, 186n1 Investment diplomacy, 162 Investment-driven growth model, 161 “Iron rice bowl,”, 4, 15n4, 49, 69, 70 J Jacques, Martin, vii, 33, 45 Jensen, Michael C., 19 Jiang Zemin, 139, 142 Johanson, Jan, 155 Johnson, Chalmers, 31, 32 Joint-stock system, 50, 53, 75n9, 98–99, 102, 118 K “Kejiao xingguo,”, 140 “Keju”, 47 Kissinger, Henry, 34 Kuhn, Philip A., 32, 45, 46, 197, 207n1 Kuomintang, 93, 96, 120n3 L Labor redundancy, 69 Lange, Oskar, 30 Latecomer catchup, 158 Leapfrogging, 173 Learning curve, 186 Learning process, 185 Leasing, 65, 103, 114 Legalism, 47 Lenovo, 62 “Liang,”, 91, 120n4, 184 Linkage-Leverage-Learning Model (LLL), 157 Lipsky, John, 117 Liquidation, 2, 11, 43, 50, 77n27 Li, Weiye, 4, 67, 77n22 213 “Loan replacing appropriation,”, 113 Localization, 168, 169, 171, 173 Locational advantage, 159 Long-Term Evolution (LTE), 174 M McGregor, Richard, 64 Macroeconomic stability, Managerial autonomy, 99, 145 entrenchment, 25 incentive, 24, 25, 27, 203 Market discipline, 62, 131, 206 fragmented, 64 seeking, 14, 156, 165, 167, 175 socialism, 11, 18, 30–32, 45, 46, 57, 74, 205 Meckling, William H., 19 Mergers and acquisitions (M&A), 56, 73, 154, 157, 159, 162, 167, 168, 185, 203 Meyer, Klaus E., 76n13, 159 Minsky, Hyman, 4, 11, 18, 29 Mixed economy, 1, 18, 30 Mixed ownership reform, 3, 52–54, 76n10 Modern enterprise system, 3, 49, 50, 102 Moral hazard, 24, 28 Mortgage financing, 71 Motivation conventional, 164 unconventional, 164 N National champions, 65, 72, 200, 202 National High Technology Research and Development Program, 142 214   INDEX National People’s Congress, 108, 120n10, 148n12 National Social Security Fund, 71, 200 National Torch Program, 141 Naturalistic inquiry, Natural monopoly, 28 Non-performing loans (NPLs), 26, 50, 88, 99–101, 103, 109, 117, 119, 120n12 Northern expedition, 92 O OLI Paradigm, 156, 187n3 Operational autonomy, 3, 49 Opportunistic behavior, 156 Outward foreign direct investment (OFDI), 14, 152–154, 157–168, 171, 175, 186n2, 187n4, 187n5 Ownership advantage, 156, 157, 159, 164 and control, 56, 127, 130, 133–147, 199, 205 governance, 5, 7, 26, 27, 35, 48, 56, 88, 101–103, 118, 128, 197–199, 206 mixed, 3, 52–54, 60, 76n10 P Pan-Asian, 179 “Peaceful development,”, 177 Pearl River Piano Group, 62 Pei, Minxin, 2, 43 People’s Bank of China (PBC), 56, 96, 109, 116 PetroChina, 163 Phenomenology, 10, 197 “Piaohao,”, 90, 92 Pillar industry, 67, 200, 201 Ping An Insurance, 60, 61, 106 Polanyi, Karl, 29, 30, 196 Political economy, 4, 174, 185 Political system, 1, Power connectivity, 178, 182 post-responsible, 176 responsible, 176, 188n16 status, 181 Principal-agent problem, 20, 63 Privatization, 2, 5, 11, 19, 21, 24–27, 43, 59, 65, 69, 70, 77n27, 77n28, 88, 117, 203, 206 Product cycle, 155 Productive efficiency, 26, 69 Profit retention, 23, 49, 72, 109, 200 Promissory note, 109 Public listing, 26, 50, 73, 99–101, 118 Public–private hybrid, 66 Purchasing power, 153 Putterman, Louis, 25, 67, 69, 77n22, 77n25 Pye, Lucian, 33 Q “Qianzhuang,”, 90, 92 Qing Dynasty, 12, 89–93, 96, 97, 118 Qualitative, 8, 15n6, 197 Quantitative, 8, 96, 165, 197 R Ratio capital to assets, 110 cost to income, 110, 111 loan to deposit, 110, 111 Reform ownership, 49, 50, 54, 98, 102 sequential, 35 Remittance, 169  INDEX     “Ren,”, 47 Renminbi, 96, 115, 170 Resource-based view (RBV), 155, 187n3 Resource extraction, 162 Resource-seeking, 156, 165, 167 Return on Investment, Rights control, 3, 20, 49, 102 individual, 20, 47 ownership, 3, 20, 49, 73, 102 political, 47 Risk management, 163 S Sachs, Jeffery, 66 Shambaugh, David, 33, 45, 46 Shanghai, 64, 90, 92–94, 100, 103, 106, 107, 114 Share non-tradable, 51, 132, 134 tradable, 51, 106, 107, 132, 134 Shenzhen Zhongxing Semiconductor Co Ltd., 130 Shenzhen Zhongxing WXT Equipment Co Ltd., 130, 135, 137, 147n9 Shenzhen ZTE Co Ltd., 131 Silk Road, vii, 175, 176, 178, 179 Sino-British Currency Stabilization Fund, 95 Social justice, 27 order, 46 safety net, 4, 27, 35, 69, 71, 72, 74, 200 stability, 4, 46, 47, 69 Socialism with Chinese characteristics, 1, 30 Socialist market economy, 4, 30, 57, 127, 153, 196 215 Social service organization, 57 Song, Hongbing, 90, 92 Soong Tse-ven, 92 Soviet Republic of China, 93 Soviet Union, 1, 89, 92 Special economic zones (SEZs), 130, 152 Split-share reform, 51, 101, 103, 107, 132 system, 51 State capitalism, 34, 48, 146, 202 civilization, vi, 11, 33, 45 control, 5, 6, 9, 12, 13, 25, 26, 29, 34, 35, 48, 88, 89, 97, 101, 110, 118, 127, 138, 139, 142, 143, 145, 198, 199, 206 control through ownership and governance, 5, 7, 26, 35, 48, 103 historical, 18, 32–34, 44 imperative, 165 joint-stock, 7, 36, 56, 100, 198 legal person, 26, 54, 101, 105–107, 131–134 State Administration of Foreign Exchange (SAFE), 57, 100 State Council, 49, 50, 52, 53, 57, 100, 102, 103, 108, 109, 141, 142 State Economic and Trade Commission, 131, 141, 166 State Grid Corporation, 63 Stock exchange Hong Kong, 100, 129, 131, 132, 134, 147n4, 172 Shenzhen, 129, 131, 132, 134, 147n3 Strategic industry, 12, 56, 57, 87–119 Subjective meanings, 216   INDEX T Technology capability, 129, 156, 157, 174, 201 incubator, 168 innovation, 6, 113 transfer, 185 Telekom Malaysia, 173, 174 Theory agency, 7, 11, 18–20 alternative, 11, 18, 28–32, 205 developmental state, 11, 18, 31–32, 205 economic embeddedness, 11, 18, 29–30, 205 market socialism, 11, 18, 30–31, 205 property rights, 7, 11, 18–21, 205 public choice, 7, 18, 19, 21 public enterprise, 4, 7, 10, 17–23, 28, 48, 63, 73, 128, 146, 195, 197, 199, 204 Western, vi, 4, 10, 14, 17, 18, 22, 28, 35, 44, 48, 73, 74, 128, 145, 199, 204 3G, 172, 174 Top-level design, 182 Total factor productivity, 66–68 Trade cooperative zone, 183 promotion, 23 regulation, 109 Transnational corporations, 152, 204 U U Mobile, 174 Unionpay, 114 Uppsala model, 155, 187n3 Urban collective, 198 V Vahlne, Jan-Erik, 155 Vernon, Raymond, 155 W Wade, Robert, v, 31 Wakeman, Frederic, 46 Wang Gungwu, 33, 176 Wen Jiabao, 27, 115, 161, 162, 174 Wildau, Gabriel, 22 Woetzel, Jonathan.R., 65 Wolf, Martin, 117 Woo-Cumings, Meredith, 31 Woo, Wing Thye, 31, 66 World Trade Organization (WTO), 7, 89, 113, 166, 200 Y “Yangqi”, 56, 60, 67, 76n9, 135 Yin, Wenyan, 159, 164, 165 Yunxing Electronics Trading Company, 130 Z Zhang, Weiwei, 33, 45, 75n2 Zhou Xiaochuan, 110 ZTE Corporation, 9, 13, 57, 127–147, 147n9, 147n10, 147n11, 148n14, 148n15, 148n17, 148n18, 172–175, 199, 201, 203 ZTE Holdings, 128–138, 147n8, 147n9 ... Bank of China Asian Financial Crisis Asia Infrastructure Investment Bank Assets Management Companies Asia-Pacific Economic Cooperation Association of Southeast Asian Nations Bank of China Bank of... World and the Birth of a New Global Order Ran Li • Kee Cheok Cheong China’s State Enterprises Changing Role in a Rapidly Transforming Economy Ran Li Institute of China Studies University of Malaya... transformation of China’s state enterprises, state enterprise system, and China’s political-economic system, and her current areas of research include China’s global strategy and China-Malaysia economic