Abstract
This paper explores how policies of market liberalization and partial privatization of State-Owned Enterprises (SOEs) involved in the production and provision of key inputs – banking, energy and telecom – affect the vulnerability and resilience of an economy. SOEs’ response to such policy changes and their ability to operate under the new market conditions are crucial for maintaining quality and continuity in the supply of intermediate goods and services that underlie the functioning of the economy and society. The paper analyses this issue in the context of Chinese SOEs’ reforms. It finds that privatization and liberalization in China have been designed (i) to strengthen the economy’s resilience, as access to private capital and foreign markets has contributed to companies’ growth and to increase the stock and quality of critical infrastructure for the country; but also (ii) to minimize the vulnerabilities that arise from such policies, by envisaging measures against volatility in capital markets and the destabilizing effect of market competition through ad hoc regulation. The paper may prove relevant for the next steps of Chinese SOEs’ reforms and its findings might find applicability in other geographical contexts as well.
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Notes
Recent academic contributions have reconsidered the role of SOEs by highlighting important points of strength as compared to Private Enterprises (PEs). This literature started in the 2000s but gained influence in the 2010s, after the world economic crisis highlighted the limitations of deregulation and the need to rethink corporate governance in ways that allow the pursuit of public interests in addition to profitability for shareholders. However, the main emphasis is still on the traditional theme of SOEs’ vs PEs’ performance, the countercyclical role of SOEs in times of recessions (Bance and Bernier 2011), and on their role as providers Services of General Interest (SGI) (Bance and Obermann 2015; Florio 2013). The debate on SOEs among Chinese scholars emphasizes similar aspects, especially those related to performance, while Chinese policy-makers seem also to consider the strategic implications of SOEs’ reforms. In Europe and BRIC countries (where SOEs are still relevant), little research has addressed the industrial policy role that contemporary SOEs can play (Bass and Chakrabarty 2014; Clò et al. 2017), their systemic relevance as suppliers of essential inputs to final producers, and the implications for economic competitiveness deriving from it (Cardinale 2020).
See Kogut & Walker (2001) on the relation between changes in ownership structure as a result of globalization and resilience of the German financial sector. The paper argues that the globalization of the German financial sector was not detrimental for its resilience because the sector has successfully maintained some fundamental mechanisms of cooperation among local actors while also adapting them to the new globalized context. This finding is important for the purpose of this paper because globalization is closely related to the policies of liberalization and privatization, and has similar effects on governance and organizational changes of companies and industrial sectors.
See Caschili et al. (2015a) for an in-depth analysis of the role of international networks and supply chains for resilience and vulnerability.
However, the entry of new energy firms is likely to partially offset the above-mentioned negative effects on energy security if the growing number of operators leads to an increase in investment in the sector and generates additional supply without causing coordination problems.
See sections 3 and 5 of this paper for a more detailed explanation of the nexus between national industry and the economy’s resilience.
In the International Relations literature, a State is considered a superpower if its cooperation is needed by the international community to tackle every major world issue, considering the extent of its economic and political interests worldwide as well as its power of deterrence (Mearsheimer 2001).
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Cardinale, R. State-Owned Enterprises’ Reforms and their Implications for the Resilience and Vulnerability of the Chinese Economy: Evidence from the Banking, Energy and Telecom Sectors. Netw Spat Econ 22, 489–514 (2022). https://doi.org/10.1007/s11067-021-09540-x
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DOI: https://doi.org/10.1007/s11067-021-09540-x