Loss in state-owned assets and the gap between the rich and the poor

1

• Loss in state-owned assets and the gap
  between the rich and the poor
• liu fengyi
• School of Economics, nankai
  university,Tianjin , China

2

• 1.Introduction
• 2.Literature
• 3.Specific evidence
• 4.Conclusion

3

• 1.Introduction

4
1.1 The reform of state-owned enterprises affects
income distribution system

• In china, The reform of state-owned enterprises
  is called the central link of China's economic
  system. This means that the reform of state-owned
  enterprise is the key of the reform of China. The
  reform of state-owned enterprise changes the old
  production relations. The state-owned property
  decreased constantly and private property is
  increasing relevantly. This must affect income
  distribution system.

5
1.2 The reform of state-owned enterprise causes
the great loss of state assets.

• The reform of state-owned enterprise was the
  reform of contract and responsibility system in
  the 1980s to the joint-stock enterprise in the
  1990s. Along with the deepening of reform, the
  increasingly conspicuous problem is the great
  loss of state assets.

6
1.2 The reform of state-owned enterprise causes
the great loss of state assets.

• According to calculation, the annual loss of
  state assets in 1980s was 50 billion Yuan. Since
  the 1990s, the annual loss of state assets was
  close to 100 billion Yuan. There might be a loss
  of 1/100 if calculated by 1 billion state assets
  in 2005.This caused strong repercussions in
  China.

7
1.3 There are several kinds of the loss of state
assets

• There are several kinds of the loss of state
  assets. For example, some managers of state-owned
  enterprises use handle rights to change the
  state assets into private income. Some deprive
  the state assets in name of the reform of
  joint-stock.

8
1.3 There are several kinds of the loss of state
assets

• Some use the MBO form to buy the state assets
  under the normal price. A great quantity of the
  state assets becomes private property.
• It is servied that the price of the state assets
  was underestimated about 10 in public auction,
  while the price of the state assets was
  underestimated about 30 in privately
  transaction.

9
1.4 The gap between poor and rich is serious

• UNDP believes that the current Gini coefficient
  of China is 0.45. The poverty-stricken people who
  accounted for 20 of the population own only 4.7
  of the income and consumption, while the richest
  people who accounted for 20 of the total
  population hold as high as 50.

10
1.4 The gap between poor and rich is serious

• It is obvious to note that the gap between rich
  and poor has already broken the reasonable
  limitation, and the Chinese government has also
  realized the seriousness of the problem.
  Therefore, the direction of central government
  thinking is focused on narrowing the gap between
  the rich and the poor and emphasizing social
  fairness and social justice and social harmony
  since 2003.

11

• 2.Literature

12
2.1 The opinion of the new liberalism

• There are two kinds of opinion about the loss of
  state assets among the theorists in China. One is
  the theory of the new liberalism , especial, the
  property rights of The New Institutional school.
  the theory of the economists of new liberalism
  who believe the power of market. They hold that
  public ownership and market economy are
  incompatible to each other. The root of the loss
  in national assets is indistinct property.

13
2.1 The opinion of the new liberalism

• SO they advocate that privatization is the only
  solution.
• Some theorists in China who believes in The New
  Institutional School denied the fact that the
  state assets were lost. They think that selling
  state-owned enterprises were only changed the
  form of national assets. It can benefit the
  market efficiency.

14
2.1 The opinion of the new liberalism

• They also denied that the loss of national assets
  aggravates the disparity between poor and rich.
• (representative figure
• Zhang weiying 1995,2004 Zhou qiren,1999,2003
  Yao yang,2004
• Fan gang 1998,2004 Wu jinglian 2004,2005)

15
2.2 The opinion of the marxism economics

• Marxism economics has important position in
  China. It is official economics. The other
  opinion belongs the economists of marxism. They
  hold that a great quantity of the national
  assets were changing private ownership.

16
2.2 The opinion of the marxism economics

• The reason of the loss of state assets is not
  because State-owned enterprises fail to gear up
  themselves to the market economy but because the
  system of state-owned assets is lack of order.
  The solution is the reform of the management
  system of state-owned assets, not privatization.

17

• (representative figure Cheng enfu
  1998,2000,2004 Zuo dapei, 2001, 2004, 2005Meng
  jie 2004 Bai baoli 2004.Wu yifeng, 2003Ding
  bing 1999.)

18

• Chinese central government is inclined to the
  marxism opinion, and central government
  formulated many policies to forbid the loss of
  national assets from 1998 to today. But the
  local officials were willing to accept the theory
  of the new liberalism. So the central government
  advocated to criticize the new liberalism
  economics.

19

• 3.Specific evidence

20
3.specific evidence

• The difficult point about my topic we cant
  research for the substantial directly data about
  the loss of state assets. So I have to analyse
  the relations between the loss of state assets
  and the income in town of China indirectly.

21
3.1 The quantities of state-owned enterprise
change (chart 1)
state-owned
collective
others
22
(No Transcript)
23

• It was a key year about the reform of state-owned
  enterprises in 1997 .There are two reasons one
  was that the state-owned enterprises met the most
  difficult in reform, the national assets became
  net loss, it never appeared before. the other
  was that the fifteenth mission of chinese
  communist party was held, the central government
  permit

24

• to sell small state-owned enterprises while
  necessary.
• So the local governments sale the national
  assets since 1997 rapidly, and
• the private property increased relevantly.

25
3.2 State-owned unemployment among total city and
town

26

• The workers in state-owned enterprises met severe
  challenge at that time. their income decreased
  rapidly.

27
3.3 The state-owned enterprises hold the ratio of
the low income group
28

• Data source
• 1.Ministry of labour and social security.prc.
• 2.Li peilin.Socal stratification in chinese
  today.2004,p86.

29
(No Transcript)
30
(No Transcript)
31
(No Transcript)
32
(No Transcript)
33
State-owned different quantities
34
Private enterprises quantities
35
3.4 The Gini coefficient of China change
1978-2005
36

• Data source
• www.earm.cn
• Cao putting in order.

37

• 4.Conclusion

38
4.Conclusion

• 4.1 The loss of state assets must inevitably
  results in the polarity between rich and poor.
  One extreme is the embezzlement of the state
  assets. They actually become capitalists the
  other extreme is the workers in the original
  state-owned enterprises who had come down to
  physical labor.

39

• Under the condition of excessive supply of labour
  force in china, their wage has been screwed down
  to a very low level. What is worse, many workers
  who have made great contributions to the
  accumulation of capital in state-owned
  enterprises become unemployment in the process of
  reform. They have to survive on a minimum
  standard of living with the subsistence of
  security.

40

• Before the reform and opening up, the state-owned
  economy accounted for 90, while the collective
  economy accounted for 5,there was only a 5 of
  the private sector of the economy. However, 20
  years after the reform, the ownership of
  state-owned capital occupies a percentage of only
  26, whereas ownership of private capital rises to
  56. The rest goes to collective economy and
  foreign enterprise.

41

• It is obvious that in the wax and wane of the two
  economic sectors, private ownership takes up a
  large proportion. We may say the loss of state
  assets is the important reason for the
  disparities in wealth.

42

• 4.2 This paper holds the idea that privatization
  is not only unable to solve the efficiency of the
  enterprises, but also likely to widen the
  disparities in wealth. On the other hand,
  strengthening the management of state assets can
  not only bring the advantage of public ownership
  into full play, but overcome all the ill effects
  of privatization.