Document Type

Master's Culminating Experience

Publication Date



The report focuses on microeconomic reform in China, especially on entrepreneur problems and corruption in State-Owned Enterprises (SOEs). China has about 145,000 SOEs employing 113 million people. State enterprises account for 70 percent of fixed assets but only 34 percent of industrial output. The total state enterprise debt is greater than China’s bank deposit base. In some cases, SOEs are unable to afford to pay worker salaries or make pension payments. Reforms caused large-scale lay-offs and plant closures in recent years.

Entrepreneurs’ corruption contributes negative effects to SOE reform. Corruption is one way of getting around political control and poor property rights but causes problems of its own. Poorly defined property rights in China are one reason for corruption in SOEs. The Chinese government is being pressured to reform the inefficiencies of the enterprise system, including entrepreneurial development in SOEs. Though China has worked to develop new plans and to improve existing plans of reform in the past 10 years, over-employment, inefficiency, entrepreneurs’ corruption and state-agency problems continue to contribute to poor performance. The SOE reform has become the central link in economic restructuring m China. The Chinese government is no longer considering whether to implement further reform in SOE, but how.