Economic performance of state‐owned enterprises under the Chinese Communist Party's supervision: Some reflection on China's economic reform. (14th May 2019)

• Record Type: Journal Article
• Authors: Hu, Len‐Kuo; Lee, Daniel C.
• Is Part Of: Pacific economic review. Volume 25:Number 4(2020)
• Page Start: 495
• Page End: 511
• Publication Date: 2019-05-14
• Subjects: State‐Owned‐Enterprises (SOEs) -- principal‐agent‐supervisor model -- the economic role of party; Pacific Area -- Economic conditions -- Periodicals; 330
• DOI: 10.1111/1468-0106.12298
• Languages: English
• ISSNs: 1361-374X

Abstract

Abstract: This study examines the economic behaviour of state‐owned enterprises in China with special emphasis on the role of the state's sole party as either an agent (management) or supervisor in the enterprises. It is found that with the construction of an incentive‐compatible compensation design and the Chinese Communist Party orchestrating an appropriate objective guideline for its members to follow, state or socialist capitalism could still achieve efficient economic performance. If party members did not behave prudently or pursued their personal interests instead of the state's overall welfare, there could be grave consequences, including corruption, nepotism or even the breakdown of the system.