Abstract

Since 1978, the performance of Chinese state-owned enterprises showing a U-shaped pattern of change. 1992 years ago, in a seller's market and shortage of economic conditions, the state-owned enterprises to improve productivity and profit margins decline. One crux of the internal control, soft budget constraints and administrative intervention characterized by governance mechanisms. After 1992, the performance of state-owned enterprises remained at the bottom, and increased substantially since 1998. Competition in the market and no substantive change in governance mechanisms in the case, the state capital to high-profit film industry aggregation and limit the entry of private capital is to improve the overall performance of state-owned key enterprises. The current should remain state-owned enterprises reform as the central link of economic reform, the reform approach is to deepen reform of monopoly industries and from the strategic adjustment of state-owned economy. Chinese state-owned industrial enterprises' performance varied with the U model since 1978. Under the conditions of sellers' market and shortage economy before 1992, the state-owned enterprises' productivity increased and profitability decreased. After 1992, the profitability fluctuated at the bottom of U-curve and then significantly increased. This paper makes the argument that state-owned capital clustering into high profitable industries and the entry restrictions on non-government capital mainly contribute to the improvement of state-owned enterprises' performance under the circumstances that market competition was aggravating and governance mechanisms not substantively improved. Consequently, the reform of state-owned enterprises still is the core of China's economic reform. The government should further reform monopoly industries and strategically adjust the layout of state-owned economy