Nationalist era When China's
Nationalist government controlled
northeast China from 1946 to 1948 after the end of the
Second Sino-Japanese War, it restructured formerly Japanese enterprises into SOEs. It also confiscated the enterprises of puppet states, such as the
Wang Jingwei regime. Most of these enterprises were re-organized into the
National Resources Commission, China Textile Construction Company, and China Merchants Steam Navigation Company. After the war, the Nationalist government focused on industrial reconstruction in
Manchuria. As a result, it many SOEs in inland China were privatized, transferred to local governments, or shut down.
Early People's Republic of China Following the CCP victory in the
Chinese Civil War, one of the party's early steps was to nationalize enterprises that the defeated
Nationalists had controlled. At the
founding of the People's Republic of China, 27.8% of the country's industrial output came from SOEs. Over the 1950s, the government gradually restructured the industry under state ownership. By 1956, SOEs produced more than 80% of China's industrial output. , 1960.In the early years of the PRC, the Manchuria region had the highest concentration of SOEs. These were prominent in the PRC heavy industry-focused method of "socialist industrialization" (a term adopted from the Soviets). The policy trend from the early to mid-1950s was to centralize control over SOEs. SOEs were generally within the authority of central government industrial ministries during the
First Five-Year Plan period of 1953–1957. Proponents of centralizing authority over SOEs included
Gao Gang. During the
Great Leap Forward, control of SOEs was largely decentralized, with control being transferred to local governments instead of the central government. This process of decentralization also significantly increased the power of local CCP organizations. During the
Third Front campaign to develop heavy industry in China's interior regions, almost 400 state-owned enterprises were re-located from coastal cities to secret sites in the Chinese interior where they would be more protected in event of foreign invasion. During the
Cultural Revolution, significant amounts of authority over national SOEs was transferred to local CCP
cadres and
People's Liberation Army officials. Among the major SOEs transferred to local control during this period were
Daqing Oil Field, Changchun Auto Manufacturing, and
Anshan Iron and Steel.
Reform and opening up The period from 1978 to 1991 was characterized by "deal track" economic reform of SOEs. The relationship between the state and SOEs shifted from central command to strategic bargaining. SOE leaders were significant in experimentation with reform policies and could negotiate with their administrative superiors on various matters, including production targets and budgets. Beginning the late 1970s, SOEs became allowed to pay bonuses to workers. As a response to the return of
Sent-down youth, SOEs in the late 1970s and 1980s often started collectively-owned enterprises to create employment opportunities for the family of SOE workers. This approach to providing jobs was particularly common in
northeast China. Under
Deng Xiaoping's leadership, the trend towards localizing authority over SOEs was reversed, and SOE management was again centralized. The government sought to make SOEs more independent from local CCP authorities by strengthening the power of SOE directors relative to the party committees within enterprises. This approach, called "the director responsibility system under the party-committee leadership" was similar to the Soviet one-chief system of the early and middle 1950s. Beginning in the early 1980s, the central government began to develop multi-regional "general companies" which became the predecessors of central SOEs and
national champions. In 1984, the
State Council issued a directive to expand the autonomy of SOEs. SOEs were also allowed to sell surplus goods on the market once they had met their quotas. Through the reform of "substituting taxes for profits" (
li gai shui) the government sought to give SOEs incentives to pursue profits, sought to reduce SOE dependence on the government, and sought to increase market competition. Rather than requiring SOEs to remit profits to the state, SOEs were instead subjected to
income tax. Implementation of this policy was hampered by political contentions and too-hasty introduction. Following adoption of "substituting taxes for profits", SOE profits declined for 22 consecutive months.
Jiang Zemin administration After the failure of the tax-for-profit approach, China implemented its Contract Responsibility System which remained in place until the middle 1990s. Through this system, SOEs submitted an amount of their profit to the state per their contracts with the state, but could keep remaining profits. This was intended to increase the managerial autonomy of SOEs without privatizing their ownership. Increased diplomatic openness in the 1980s and 1990s helped SOEs to negotiate better trade terms. Beginning in 1991, policymakers introduced the concept of enterprise groups, initially piloting the idea with 57 SOEs. Through this organizational approach, a large SOE or a cluster of SOEs was re-organized into an enterprise group through which a parent company controlled various subsidiaries. SOEs in enterprise groups separated profit-making assets into subsidiaries which could be listed on China's stock markets, thereby introducing private capital without eliminating state control and ownership. Non-profit making assets and social welfare assets (like schools, housing, and hospitals) were either kept by the parent enterprise or transferred to local governments. Housing assets were often then sold to SOE employees at below-market prices. By May 1997, 120 SOEs (accounting for approximately 25% of SOE assets in the China) had been organized into enterprise groups. With the goal of boosting innovation and efficiency, more than half of China's largest SOEs had established technical development centers by 1993. The same year, the CCP issued its "Decision on Issues Related to the Establishment of a
Socialist Market Economy System." In the wave of reform thereafter, one goal was to separate SOE management from government and to empower a select group of SOEs with special property rights and autonomy. The principles of the socialist market economy also legitimized the idea that ownership of SOEs could be structured in various forms, including majority state-owned joint stock companies. In 1994, three of the largest industrial firms were selected for a pilot program of restructuring as state holding companies, thereby enabling partial public listings of their subsidiaries' assets:
Sinopec,
Aviation Industry Corporation of China (AVIC), and
China Nonferrous Metals Industry Group. The
1994 Company Law provided restructuring guidelines for SOEs, such as SOEs adopting more corporate structures like shareholding and limited liability, procedures for paying dividends, establishing subsidies, and bankruptcy. The law stated that the government would continue to make supervisory appointments for SOEs and provided that workers would be consulted. As part of
China Western Development program, China's five large state-owned
hydropower companies planned, underwrote, and built the majority of dams on the river and its tributaries. On 12 August 2005, the State Council released the
Opinions on Encouraging, Supporting, and Guiding the Development of Individual Businesses, Private Firms, and Other Parts of the Non-State Economy (commonly known as the 36 Articles). As Jin et al. wrote in 2022, Xi emphasizes the leadership function of the CCP in SOEs and states that SOEs must make the party their "political core". He emphasizes the importance of CCP branches within SOEs. They are expected "to work together with grassroots organizations to collect intelligence and information, dissolve and/or eliminate security concerns at the budding stage," according to the ''
People's Liberation Army Daily''. ==State Council (Central Government)==