Post-WTO economic effects on state-owned enterprises in China

Dissertation / Doktorarbeit von Ben Beiske

Abstract:

The importance of the World Trade Organisation (WTO) for international free trade today has enticed China to join the WTO in December 2001. The significance of WTO membership for China cannot be underestimated, inevitably speeding up much-needed economic reform in the country. The gradual transition from a planned- to a market-economy is expected to continue in the future. The severity of the impacts for the economy will depend on how successful China is in providing policies that will assist the nation in the major adjustment problems that it faces in the future.

The expected, actual, and needed implications for China’s state-owned enterprises (SOEs) resulting from WTO membership will be investigated in detail; in the process, the significance of SOEs to the Chinese economy will be highlighted. SOEs are mostly ill- prepared for a post-WTO China, and the dismal state of these companies has already led to the decline of market share in the past decade. For the future, the retreat of the state is likely to continue. The main implications for SOEs from China’s WTO membership are seen in the areas of competitiveness, corporate governance, privatisation, mergers and acquisitions, property rights, unemployment, and attracting and retaining qualified personnel. This dissertation offers one of the first detailed insights into the challenges facing China’s SOEs today and the implications of China’s WTO membership for these companies, while also highlighting the areas that require future attention. The understanding of the role and meaning of SOEs for the Chinese economy is of immense importance for foreign investors wanting to invest in the country, already cooperating with China’s SOEs, or looking into the possibility of such.

Table of Contents:

I.	Table of Contents
II.	LIST OF TABLES	IV
III.	LIST OF FIGURES	V
IV.	GLOSSARY	VI
1.	INTRODUCTION	1
1.1	AIM &OBJECTIVES	2
1.2	OVERALL RESEARCH APPROACH	3
1.3	STRUCTURE OF THE DISSERTATION	3
2.	THE WTO & FREE TRADE	4
2.1	CHAPTER INTRODUCTION	4
2.2	THE WTO	4
2.2.1	UNDERSTANDING THE WTO	4
2.2.2	THE STRUCTURE &WORKING OF THE WTO	7
2.2.3	SIGNIFICANCE OF JOINING THE WTO	13
2.3	CHAPTER CONCLUSION	16
3.	CHINA & THE WTO	18
3.1	CHAPTER INTRODUCTION	18
3.2	CHINA’S LONG MARCH TO WTO MEMBERSHIP	18
3.2.1	PROLONGED DIFFICULTIES	19
3.2.2	FINAL ACCESSION	21
3.3	CHAPTER CONCLUSION	22
4.	METHODOLOGY	23
4.1	CHAPTER INTRODUCTION	23
4.2	OVERALL RESEARCH APPROACH	23
4.2.1	OBJECTIVITY, VALIDITY & TRIANGULATION	25
4.2.2	CHINESE STATISTICAL DATA	26
4.3	SECONDARY RESEARCH	27
4.3.1	LIBRARIES	27
4.3.2	ELECTRONIC DATABASES	28
4.3.3	NEWSPAPERS & PERIODICALS	29
4.3.4	INTERNET	29
4.3.5	SEARCH TERMS	30
4.4	PRIMARY RESEARCH	30
4.4.1	CASE STUDIES	31
4.4.2	QUESTIONNAIRES	32
4.4.3	INTERVIEWS	32
4.5	CHAPTER CONCLUSION	34
5.	MACRO-ECONOMIC ASPECTS & CHINA’S WTO MEMBERSHIP	35
5.1	CHAPTER INTRODUCTION	35
5.2	MACRO-ECONOMIC ASPECTS	35
5.2.1	POSITIVE IMPACTS	36
5.2.2	NEGATIVE IMPACTS	37
5.3	MACRO-ECONOMIC IMPLICATIONS	38
5.3.1	TARIFF & QUOTA REDUCTIONS	39
5.3.2	INCREASING COMPETITION	40
5.3.3	ECONOMIC REFORM, OWNERSHIP &MARKET SHARE	42
5.4	CHAPTER CONCLUSION	43
6.	CHINA’S SOE & WTO MEMBERSHIP	44
6.1	CHAPTER INTRODUCTION	44
6.2	CHINA’S SOES	44
6.2.1	SOES INTRODUCED	45
6.2.2	MAIN PROBLEMS FACED BY CHINA’S SOES	50
6.2.3	PRE-WTO STATUS QUO & DEVELOPMENT OF CHINA'S SOES	54
6.2.4	MAIN PRE-WTO ECONOMIC REFORMS	56
6.3	IMPLICATIONS FOR CHINA’S SOES	56
6.3.1	COMPETITIVENESS & FREE COMPETITION	57
6.3.2	CORPORATE GOVERNANCE	61
6.3.3	PRIVATISATION	64
6.3.4	COOPERATION, CONSOLIDATION & ACQUISITIONS	69
6.3.5	PROPERTY RIGHTS	71
6.3.6	DOWNSIZING & UNEMPLOYMENT	72
6.3.7	ATTRACTING & RETAINING QUALIFIED WORKERS	75
6.4	EXCURSION: AGRICULTURE, CHINA & THE WTO	76
6.4.1	THE CHINESE POINT OF VIEW	78
6.4.2	THE AMERICAN POINT OF VIEW	79
6.4.3	EXPECTED CALCULATED EFFECT	80
6.4.4	AGRICULTURAL REFORM	81
6.5	FUTURE OUTLOOK	84
6.5.1	SOES: POSSIBLE FUTURE DEVELOPMENTS	86
6.5.2	NOT ALL GLOOM	87
6.6	CHAPTER CONCLUSION	88
7.	CONCLUDING REMARKS	90
7.1	CONTRIBUTION & SIGNIFICANCE OF THE DISSERTATION	90
7.2	AREAS OF FURTHER RESEARCH & LIMITATIONS	91
7.3	OVERALL CONCLUSION	92
V.	APPENDICES
VI.	BIBLIOGRAPHY