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Issue № 76. October 2019

Business Groups in China: Emergence, Structure, Role in the Reform of State-Owned Enterprises

Marina V. Belousova

Postgraduate student, Faculty of Public Administration, Lomonosov Moscow State University, Moscow, Russian Federation.
E-mail: marina.belousova@web.de

Since the mid-eighties of the twentieth century as a reform of the state-owned enterprises in China was launched, numerous business groups emerged. The Chinese government, both at the Central and local levels, has played a decisive role in their emergence and advancement. The article considers the origin and progress of business groups until 2003, as the State-owned Assets Supervision and Administration Commission was established. Business groups were assumed to be a solution for the problem of dispersed production capacities and inefficient management practices as horizontal associations had to take on the role of exchange mechanisms on brands, distribution channels or production capacities. As the deficiencies of this organizational pattern became obvious, the Chinese government supported development of equity interest in joint-venture arrangements as well as mergers and acquisitions of loss-making companies by those more efficient and technologically advanced. A pilot project on launching the largest business groups was gradually implemented in the 1990s. The participants were big companies with potential to take over as a driving force of the Chinese economy. The government of China took numerous measures to support pilot enterprises. In particular, various political and administrative reforms were introduced, such as separating the ownership rights from the management rights, reducing the number of administrative bodies and establishing a state assets administration and management agency. Access to subsided credits, short-term credits and foreign currency necessary for acquiring foreign technologies was provided. The author lists the formal features of the business group, considers the regulatory framework for their development, as well as a set of measures taken by the state in the context of a large-scale reform process of state-owned enterprises. 

Keywords

Business groups, state-owned enterprises, system of modern enterprises, holding group company, effective management practices. 

DOI: 10.24411/2070-1381-2019-10014

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