State capitalism in China

Of emperors and kings

China’s state-owned enterprises are on the march

See article

Readers' comments


silent night

Some China’s state-owned enterprises seem like so huge only because China is the second largest economy and give some people misconception.In fact,China has become a more capitalistic country than most European countries.from the Chinese point of view,most European countries will been looked on as real socialist or communist states. Many people including CCP agree that a real communistic society should look like Nordic countries at least.

There is an unique historical background for China's private enterprises.It takes only 30 years that private enterprises are accounted for over 60% of GDP in China.No private enterprises before 1977 in China,so only state-owned enterprises had money to invest in somethings at the first. The history of oldest China's private enterprise can't be more than 30 years.If a private enterprise is found in 1980's,most people will look on it as one of "oldest enterprise" and have a "very long" enterprise history.

The statistics data the last half year in China shows that 57.7% of investment capital in China come from private enterprises, 35.1% of investment capital from China’s state-owned enterprises.

I don't oppose state-owned enterprises or so-called state capitalism,but they need reform in order to improve the whole economic benefits and share more wealth for people in China.


@RaptorNXT - The Economist consistently offers stimulating pieces written in beautiful and clever English to provide a very enjoyable read. This article is indeed well-written and, appealing to widespread, one-dimensional assumptions about China, it seems persuasive. Well-researched, I would argue, it is not.

Banyan writes:

"The Chinese government could do better than merely to suppress these tensions. Political or legal reforms are desperately needed in order to resolve them, but they appear not to be on the table at all."

There are number of very clear and tangible indicators that substantial political and legal reforms are indeed on the table, and underway. The tensions that Banyan refers to are themselves, along with their popular expression and domestic media coverage, products of this reform.

Political and economic reform have been explicitly on the table and emerging in China over the past 30 years. Transforming a planned economy into a market economy after 30 years of Marxist-Maoist ideological extremism, is an unprecedented challenge. And China is doing so with, 1.3 billion citizens to feed, educate, provide healthcare for and employ.

Since the reform period in China began (circa 1978) the number of SOE's has been reduced from perhaps 10,000 to 150. They do indeed enjoy favored status, particularly those in 'strategic' industries. One does not need to search long in 'free market' western economies to identify a number of corporations or organizations that enjoy similar patronage and support.

Chinese senior leaders are also serious about bringing about political reform - it has been real and continual, though cautious. Rural areas have begun to have free direct elections, the powers of the legislative assembly (the National Peoples Congress) are increasing, as well as those for provincial people's congresses. Mandatory retirement ages and term limits have been set on senior leaders. In his report to the 17th peoples congress (2007) President Hu Jintao used the word "democracy" positively 61 times. Cynics may argue that the rhetoric is empty and that all senior leaders are simply trying to protect their power and are too heavily invested in the status quo. But it is more likely that many senior leaders in the Party believe in the universal values of freedom, democracy and human rights. Their is an abundance of literature to suggest this is the case. It is true, however, that senior party members have different ideas and timetables regarding how to apply these values. This is to be expected in a highly diverse country with a huge population, undergoing rapid industrialization and urbanization in a turbulent environment.

The speed and nature of economic and political reforms in China may not satisfy western observers. But, for the Party - and the Chinese people - satisfying western observers or one-dimensional concepts of 'democracy' are not of significant concern. Maintaining stability and enabling the majority of Chinese citizens to achieve a "well-off" life are the absolute priorities of the Party.

Much more reform is still needed. Senior Chinese leaders recognize the urgency, but achieving reforms with stability requires a methodical, well-managed process and a strong central government - and time.


"David Michael of BCG observes that the government forces state firms to shoulder all manner of extra costs. For example, when coal prices shot up recently, the country’s energy giants were not allowed to pass the hikes on to consumers."

Sounds like a good idea.


There will always be some state involvment in industry, but China takes it to a whole new level. Capitalism with Chinese characteristics...
Biggest problem I see is the lack of a level playing field, as this involvment often acts as an indirect barrier to trade. Seen the same thing in Japan for decades, but to a lesser degree.

Seems to me, and correct me with evidence if you think differently, but the Chinese State Capitalist only look after themselves. With the distinctive exception of Western financial speculators, most Capitalist try to take care of their customers, to stay in business long term.


At a time when major corporations in the west are robbing the middle class of their future, at a time when Occupy protests are spreading across the globe, at a time of great economic uncertainty in US and Euroupe, The Economist has once again put ideology in front of reality. China, by supporting domestic firms and putting growth in front of profit China has been able to create employment. While the western model of profit above all else has enrich the select few at the expanse of the many.

teacup775 in reply to rep3

I agree with your ending statement, but I have to ask what happens to all the non state employers and employees? Are those running the state owned enterprises winning/running on merit?

Lacking funds small outfits are driven to underground financing,

Lastly, I think the major lesson is that Western financial institutions create problems precisely because they are so huge and so indulged by government laxity and the Fed supplying cheap credit. Indulgence breeds contempt, yes?

Central European

Chinese state owned enterprises (SOEs) are the main instruments of employment there. It is a mistake to see them as for-profit and competitive entities. Their main task is to provide more or less acceptable employment for hundreds of millions.
Economic growth and one child policy will make their share to ease the pressure on the job market in the long run. Currently, however China needs exactly that type of SOEs what it has.
The other option would be to let SOEs collapse and dereguate economy. Competition, transpareny, rule of law would surely be strengthened, but wo would pay for the 300m unemployed?


Some commentators on RT have described US as a Military University Industrial state with many state subsidies and grants given to many SOEs and Universities such as University of Calfornia to produce the ultimate Weapons of Mass destruction.

Yingnam Fong

"They decided to scrutinise not just Sinochem itself but all of SASAC’s empire."

That is a very hostile manner to challenge the entire China's pricing system. The Dutch simply dont want trade but trade war. China should call off the talk.


One got to love how the debt laden Westerners try to show the "right way" for the Chinese, while asking for a bailout.

If I were I Chinese, I would also block any takeover attempt by Coca-Cola.


This article should be rewritten and categorized under Finance and Economics. SOEs and state banks are Beijing's primary instruments macromanaging the economy. SOEs, when coordinated, can greatly influence production and consumption, while the four state banks control the money supply.


You can't blame Asian governments when they see how the Finance industry has taken over the US govt. Why go through the entire process when you can control these companies from the start?

Sharma economist

Isn't "one of the only" an oxymoron? How about using "one of the few" instead? A lot of us read The Economist as one of the few publications where attention to writing is combined with high-quality information.


"A Congressional report released on October 26th railed against the unfair advantages enjoyed by state-owned firms and lamented that China is giving them “a more prominent role”.

So China is growing at 10% per year because the government is involved in supporting businesses and directing capital. ( Just as in the developmental states of Japan, Korea, Taiwan, Singapore and others. Just as the US, UK and Germany did years ago when those countries industrialised. Just as the US government has done with aerospace, defense and information tech sector over the last 50 years.

But China is being more successful than the "get the government out of the market" muppets and therefore it is cheating? If the Right in the US want to get the state out of the market let them!! But what right do they have to tell others to take a losing strategy just because they are doing so dismally.


Deception has a central place in the Chinese way of looking at the world. It's deeply ingrained, institutionally and culturally. Expecting the Chinese to do what they promised to do when they joined the WTO (or at least what foreigners think they promised) exhibits a profound misunderstanding of Chinese thinking. Fair play, honesty, rule of law? Ain't happening any time soon.

maring 111111 in reply to SunT

Chinese have learned all those skills when they were dealing with the West powers in the last 200 years :-))) Apparently, a quick learner that gives teachers uncomfortable challenges.



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