Corporate Restructuring and Governance in China
Working with Professor Thomas Heller of the Stanford Law School and scholars from China, this project will collect both survey and qualitative data to explicate the process of corporate restructuring and governance reform over the last decade. It will also assess the economic and political consequences of that reform, identifying the stakeholders, delineating the new corporate forms that have emerged, analyzing how they function, and observing the problems that they encounter and create. Implicit in the research design is the desire to capture the regional and sectoral variation inherent in the reform process.
The project will ultimately result in a book, but is currently in its preliminary stages. During summer 2001, Professor Oi focused on strategies for corporate restructuring in SOEs, interviewing officials and factory managers in Beijing, Shanghai, and counties near Hong Kong. Preliminary findings point in two directions. First, it appears that China is making headway in reforming the heart of the state socialist system. More and more state-owned factories have been privatized, some being sold to domestic investors, and others to foreigners. Following the Western model, and sometimes with the help of foreign brokerage houses, increasing numbers of companies are being listed on domestic or foreign stock exchanges. Formerly state-run firms have established boards of directors as well as boards of supervisors as part of their corporate governance. Increasingly focused on the bottom line, firms are streamlining and cutting costs. SOEs are handing off nonproductive social service sectors to local governmental authorities, such as schools and hospitals, which were once part and parcel of state socialist firms. Most telling, the once-scared "iron rice bowl" is being broken. More workers are being laid off, bankruptcy law has finally been allowed to take effect, and factories are closing.
The second direction of Professor Oi's research clearly shows that market-conforming institutions have been tempered by concerns about rising unemployment, decreasing government revenues, and mounting enterprise and bank debt. China's post-state socialist leadership is instituting an ambitious program of corporate restructuring, but politics has skewed the privatization process. Most intriguing is the state's concern about state workers displaced in the course of privatization. These concerns affect not only the speed and the nature of reform, but also decisions about which enterprises may be declared bankrupt or privatized. Based on interviews with local officials and factory directors involved with SOE reform, Professor Oi has begun to construct a framework - centering on bureaucratic politics and institutional constraints - for understanding China's privatization process. A preliminary paper on this subject, After State Socialism: Welfare Constraints on Privatization in China, was presented at the annual meeting of the American Political Science Association in August 2001. The paper was part of a panel entitled "Putting the Politics Back into Privatization: Cross-National Studies of Transitions in Socialist, Postsocialist, and Developing Countries".