China faces SOE reform dilemma

Reform of state-owned enterprises is a battlefield between market forces and central government power, say economists.

China’s new leadership has made a big effort to position the market as a decisive force in its economic reforms. However, the effort may be offset by some reform measures such as the anti-corruption campaign.

Corruption is widely understood to be present in the country’s state-owned enterprises SOEs because China has both a planned economy and a free market economy, which may generate two sets of prices.

“A lot of corruption comes from the arbitrage you can buy from the planned economy at a lower price via bribery and sell to the free market economy at a higher price,” said Brian Murray, chief economist in...

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