Privatization in China
February 27th, 2007
Submitted By: Adib Assassi
A group of Chinese scholars and retired officials has petitioned China’s legislature to halt the privatization of state companies, arguing it has widened the country’s income gap and fueled social unrest,” as reported in this Yahoo article (In China, A Move Against Privatization).
As Chinese industries become more and more privatized, people fear that the gap rich and poor will widen and the extremes of poverty and wealth will increase. Currently, China has a large portion of its population which is very poor. Many believe that government involvement in industry is the only way that this group can survive.
Just the other day I witnessed two individual’s in the MBA lounge having a similar debate about our country. They were discussing the role of government and its level of involvement in the lives of people and businesses. Granted our situation here in the states is drastically different than the situation in China. Nevertheless, there are similarities in the situations and we both face the same issues.
China is shifting its industry from being governmentally controlled (which it has been for so many years) to privately controlled. Maybe this does hurt many people and send Chinese revenues to foreign companies. But private industry also creates many jobs that would not be there otherwise. Also, most economists would tell you the private firms in a competitive market will create the strongest economy. And thus far, government control of industry has not been a success by any means. It is a double edged blade.
I think China is going to continue privatization and become more westernized. But is this the right move?
• How involved should the government be in business?
• Will privatized industry benefit China and its population in the long run?
• Should the government continue control of industries?
• Or, is their some balance?
Entry Filed under: Pre-Departure, Beijing, China, Misc.
4 Comments Add your own
1. Chris Carr | March 3rd, 2007 at 8:17 pm
Good post.
“Is this the right move?”
I don’t think they have a choice. State run firms just can’t compete over the long haul in today’s global economy. But to privatize, China also needs to to simultaneously develop its rule of law so that people know where they stand re: who owns property, who can transfer it, etc. See, e.g., yesterday’s Wall Street Journal article, China Builds Commerce Codes, which shows they are trying to do just that to in part assist the selling off of state firms.
2. Nick | March 4th, 2007 at 4:11 am
“Is this the right move?”
I think so.I’m a chinese student from mainland China(study in Macao now) so I guess I know how things are happening around me.
There is term “铁饭碗”meaning permanent job（which is usually jobs of the government) in China.That is, once you get the job you wil be monthly paid and there is no worry about being laid off and then the employees will be lazy.In light of their quality of products and services,a dramatic drop will be seen.It’s not a good thing for the government.Right? so in order to avoid things like the above ,the government make a lot of regulations to promote privatization to enhance the competitiveness of a company.It is good for the private company and the government.Why not do that?
That is my private opinion.
3. Chris Carr | March 4th, 2007 at 8:22 am
Nick,
Thanks for checking in. I agree.
4. Kerry Huang | March 5th, 2007 at 2:44 pm
As we have learned in International Business class, companies that are not exposed to competition (as with China’s government owned companies) flounder because they do not produce innovative products that people want to purchase. People will lose jobs but more skilled people will have better jobs in the newer private companies. The jobless unskilled people will need to go back to school to gain marketable skills.
China will definitely benefit in the long run because their companies will be able to compete on the same level as other international companies. For example, ebay is not number one in China–a Chinese auction site is. I doubt that the Chinese auction site would be as successful if it were a government company.
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