AM Lecture 2

Two stage reform period

Aivazian, et al (2004) discussed the two stage reform period of SOEs into market-driven firms.

1984-1993 First stage.

• Government gave SOEs responsibility for dealing with their own gains and losses in the market
• Use of incentive contracts to govern the relationship between the State and SOE managers

It was decided that people needed to be re-educated in a short amount of time, so the incentive scheme seemed like a good idea. It encouraged people to take individual responsibility Unfortunately, workers were not given any training, so they were effectively thrown in the deep end without being taught how to swim.

1993 onwards has been characterised by the conversion of SOE governance into that of a modern corporate governance structure.

Productivity improvements

SOE productivity is reported to have improved significantly after 1978, due to the introduction of some basic incentive schemes, although Gabriel (2000) disputes this.

Schemes gave firms more autonomy and allowed them to retain more of their profits. Incentives of SOE workers were strengthened via bonus payments and differing work contracts. This helped raise workers' incomes and firms' investments and increased the Chinese managerial labour market by linking managerial turnover to their performance.

Thus it appears that the incentive schemes worked as they focussed more on the people.

The Sichuan experiment

Western governance reforms

Effects of "Corporatization"

The Learning Organisation

Change motivation

Chinese culture

Chinese management and tradition

Sinoelectronics - Case study

Other studies and remarks on Chinese management

Conclusions