State-owned enterprise reform in China.
China is under intense pressure from the United States and to a lesser extent Europe to end its ‘unfair’ support for state-owned enterprises (SOEs). Despite this, the government continues with political and economic reforms designed to strengthen control throughout all parts of society and the economy.
Changes to SOEs’ preferential treatment will be difficult to monitor; it is usually a matter of implementation rather than legislation.
As long as some SOEs are assigned political and development goals, the state will subsidise them despite losses.
Beijing will accept lower productivity in state firms in order to maintain control of strategic industries and support employment levels.
Europe may become more inclined to allow ‘mega-mergers’ to compete against China’s large state-supported firms.
