Chinese Reform May Start Again

In 1998, China pulled the plugs on lots of State Owned Enterprises (SOE’s) and let them die. That was a painful but necessary adjustment for China.  It brought great growth.  Now China Economic Review has an article up on potential for further reform in the State Sector.

The Article notes that forces that have stalled further reform since 2005 seemed to have been pushed aside.  Thus General Party Secretary Xi Jin Ping and Premier Li Keqiang may have a chance to pull the plug on many investments that are made to prop up remaining State Enterpirses.  These big State Enterprises get money too easily under the present system. The increase in efficiency could be dramatic if money goes to the most profitable investments rather than to the most politically connected.  Even the US Post Office is still afloat, so China is unlikely to go all for the market, but any step they make will make them a stronger economy. I sense 2013 may yet be a good year for reform, and we should watch for dramatic shifts in bank lending or panic among money losing project or enterprise leaders


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Posted in: China, Government Issues

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