Forging Reform in China: The Fate of State-Owned Industry

The greatest economic challenge facing China in the post-Deng era is the reform of unprofitable, state-owned enterprises that have never truly been forced to face the pressure of a bottom line or the threat of bankruptcy. Forging Reform in China explains how and why well-intentioned, market-oriented reform measures have not been sweepingly successful to date, and what it would take to achieve meaningful reform. This book makes a compelling argument that private ownership cannot work in China's current system until governance over complex economic factors has been established, that is, until credit is tightened and market selection processes made to work.

"An empirically pathbreaking, wise, and conceptually innovative study of China's contemporary political economy. Three detailed case studies of state-owned enterprises and a probing discussion of township industries vividly illuminate the real impediments to a successful transition to a market economy. This book challenges several widely held views about China and takes the theoretical literature into new terrain. Must reading for both academics and practitioners." Michel Oksenberg, Asia/Pacific Research Center, Stanford University

"While there has been widespread speculation about how the huge inefficient state-owned enterprises are a major problem for China's economic reforms, in Forging Reform in China, Edward Steinfeld provides the world with the first in-depth, micro-level analysis of how horrendous the problem really is. He lucidly explains the tangled mess of the SEOs and China's vulnerable banking system. All how are concerned with China's economic future should take seriously Steinfeld's warning that, 'The state sector is not just dying, but also threatening to drag down the nation's entire economy along with it." Lucian Pye, Ford Professor of Political Science, Emeritus, MIT

"This penetrating, pioneering analysis of several large Chinese steel companies, offers an inside account of the enormous problems of China's state enterprises. Ed Steinfeld shows the logic of how state enterprises that 'show profits' and pay taxes have remained inefficient despite reforms. Ezra Vogel, Harvard University

"Steinfeld gained extraordinary access to three major Chinese steel corporations: Anshan, Capital Iron and Steel, and Ma'anshan. In this book he not only lays out the extraordinary stories of these firms during the reform era but also deftly develops the larger lessons of his tale. Those lessons could not be more timely. China is now seeking to reform its SOE sector through major changes in property rights and related shifts in employment terms and levels. Steinfeld argues powerfully that this will not work in the absence of even more important changes in the regulatory environment and in the state itself. Forging Reform in China sets new and important criteria for judging the fate of China's SOE reform effort, and it does so in vivid, concrete terms." Kenneth Lieberthal, University of Michigan

"Mr. Steinfeld's description of the problem is concise and coherent." Hugo Restall, Wall Street Journal

"Benefiting from remarkable access to three mammoth stell corporations, Steinfeld illustrates how the managers, confronted with an array of irrational constraints, make decisions that are logical from their perspective but disastrous for the economy. Steinfeld's report is ground-breaking for all who have an interest in the Chinese economy." Foreign Affairs

"...an enormously impressive and valuable piece of work.... The case studies are the most complete, detailed and nuanced examinations of these firms in English to date, besides being lucidly and entertainingly written, and worth the cover price in themselves." Sunanda K. Datta-Ray, The Times Higher

"...an ambitious attempt to explain the failure of state sector reform in China. The study is well thought out, deals with a broad range of literature, and utilizes case studies." Education about Asia