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21 Oct 2020  (608 Views) 
Political systems

State owned enterprises in China
Prior to 1985, the state owned enterprises (SOE) in China were inefficient. 

This changed after 1985. For the next three decades, the SOE were the pillars behind the rapid development of China.

China embarked on big infrastructure development - roads, railways, airports, ports, etc. They depended on the SOEs to carry out the work. There was no need to ask the SOEs to tender for the jobs. Instead, the work was allocated to them in some suitable way.

The performance of the SOEs were monitored using suitable performance metrics, and not on profit.

Largely, these enterprises performed well. Perhaps some were not so efficient and some might be corrupt. But the negative effects appear to be insignificant.

The rapid development of China resulted in a good outcome - many of their workers had good jobs that paid well. With high income, they are able to spend on consumer goods. China produced a large consumer market, probably the biggest in the world.

This is the positive outcome over a period of three decades. An efficient public sector created jobs and good incomes for the people. In turn, a large consumer market was created. 

This approach is probably better than the free market approach adopted by the western countries.

The western countries neglected their infrastructure. Their workers did not get good paying jobs. 

 This is my analysis of the situation. I hope that my analysis is largely correct. It suggest that the leadership of the state in infrastructure development and in public spending for the benefit of the people is a good approach. It is better than the free market.

Agree or not?

Tan Kin Lian

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