Tuesday, April 6, 2010

国进民退: Is China Really Re-nationalizing? (II)

Following up on my post from March 27, I first wanted to look back in history a bit to the origin of the term guo tui min jin to determine how it entered the lexicon of policy a decade ago. I am not certain whether this particular exercise buys us any better understanding of whether the state is re-nationalizing businesses today, but perhaps it sheds a little light on why the idea is generating debate.

Referring once again to an official history of the reforms of China's state-owned enterprises, as I mentioned before, the credit for guo tui min jin is given to a Professor Wang Jue of the Central Party School.*

In 1999, Professor Wang was interviewed about this concept, and the following few lines are important for an understanding of what policymakers were apparently hearing from the originator of this concept. I will quote a line or two of the original Chinese and follow with my (possibly flawed) translations. Words in brackets "[ ]" are my own exegesis.

Guo tui min jin means the state withdraws to let the common people go in. Someone said that guo jin min tui means privatization [um, like me a few posts back], but that is not the case. People’s economy (民有经济) and private economy (私有经济) are two different concepts. [Note that he’s distinguishing between “the people” collectively and private individuals.]


The private economy is part of the people’s economy. The collective economy [encompassing some of the few remaining township and village enterprises or TVEs] and the shareholder ownership economy [encompassing firms that have undergone conversion to a shareholding, though not necessarily publicly listed, corporation] are also part of the people’s economy.


“People owned and managed” (民有民营) should be contrasted with “state owned and managed” (国有国营). If a company is not state owned and managed then it is people owned and managed. [He’s saying these two types are mutually exclusive.] The people owned and managed (economy) contains the natures of both public and private ownership. [If I’m not mistaken, here he is saying that people owned and managed enterprises can have both the state and individuals as owners – which, again, if I’m not mistaken, violates the mutual exclusivity implied by his previous sentence.]

So what, in a nutshell, does all of this mean? Assuming the policy truly was influenced by Professor Wang, as this official state-owned enterprise history says it was, then this is what I have learned:
  • Everyone outside China (or inside, for that matter) who interpreted guo tui min jin as privatization was simply wrong.
  • The many shareholder reforms among state-owned enterprises that took place over the past couple of decades all qualify as guo tui min jin reforms. That despite the fact that few of these shareholding enterprises were listed on China’s stock markets (only about 1,800 firms are traded), and among those, all but about 200 continue to have either the state, or a state-owned entity, as the controlling shareholder.
  • One may also say that this has all been a wasted effort anyway: how unusual is it, really, for politicians and officials to interpret rules and policies for their own benefit?
As promised last time, I will later post a summary in English of a good article in Chinese describing the current debate around guo jin min tui. But I’ve taken enough of your time for today.

Thanks for reading.

And, by the way, I welcome clarifications anyone has to offer in translating the Chinese material above.

The next post in this series can be found here.

章迪诚,著,中国国有企业改革编年史,(北京:中国工人出版社,2006) pp.556-7.


  1. Greg,

    Those 200 listed firms that you mention as not have a controlling state shareholding: has anyone done any analysis (ROE perhaps) to see how they compare to the state controlled ones?

    I suppose this is going to be difficult, with so many variables to filter out before like-for-like comparisons are possible (most obviously the cheap debt on offer to state firms would screw up the ROE calculations).

    But I was wondering if it is possible to do it for a narrower industry sector, and then to compare the results in light of our private sector versus public sector argument!

    Interesting to then compare those results to other 'state-led' market environments to see if the same patterns apply - or if Chinese state firms are really doing something different...

    Anyone tried this - or just not possible to offer meaningful interpretations of the data?

    cheers, will

  2. Hello Will,

    I have come across quite a few attempts to compare the financial statements of all listed companies in China, but have yet to find anything that claim a realistic apples-to-apples comparison. (Such a thing may exist, but I haven't found it yet.)

    As a former finance guy, I always lean toward financial statements as a useful, if flawed, analytical tool. But having talked to a number of accountants and analysts in China (including some from the Big 4), I am disappointed to learn that such an exercise is fraught with difficulty (much as you alluded to above).

    (And let's be honest, despite having the financial statements of Enron, Worldcom, Lehman Brothers and AIG in-hand, analysts weren't able to provide much insight here in the US either.)

    That said, I am not yet prepared to abandon this particular type of analysis. I am still on the lookout for a plausible method of comparison, even if I have to come up with it myself. :)



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