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How China’s SOEs have changed since 1980s

China’s SOEs used to follow orders from the government, regardless of market demands and changes. It wasn’t until the 1980s that modern SOEs began to take shape. Here’s a brief look at how they’ve evolved. In the mid-1980s, SOEs began to contract out operation responsibilities to individuals or groups, who were given more autonomy and became responsible for companies’ profits and losses.

In certain trial programs, some small companies were even leased to individuals. In the late 1980s, mixed ownership was introduced. Then reforms entered rougher waters in the late 1990s. SOEs around this time were losing money due to the rapid growth of private firms. As a result, over five thousand less competitive SOEs were shut down or allowed to go bankrupt. Millions of workers were laid off and millions of small SOEs were sold to private owners and even foreigners.

A modern system was established, in which SOEs were made into modern corporations through private corporate governance practices. In 2003, the new State Assets Management Commission was set up to oversee the operation of SOEs which up to now remain a key driver of the Chinese economy.