Search

This article contends that increasing centralisation of decision-making in China will undermine the country's future economic growth. It highlights the declining role of private enterprises and the increasing role of state-owned enterprises (SOEs) in the economy, and the extension of Communist Party influence in both SOEs and the private sector through the Party's Organization Department and United Front Work Department. It argues that the increasing role of the state in the economy over the past decade has stifled growth through a decline in 'total factor productivity' because of increasing misallocation of resources. Centralisation, with associated losses in efficiency, objectivity, agility, speed and finesse regarding allocations of risks and investment, has debilitated decentralised decision-making and reduced the incentives for undertaking risks and innovation. The article argues that increasing Party control over the SOEs and the private sector will negatively impact the corporate structure and management decisions, exacerbate the fundamental problems of corporate governance and limit or hamper innovation. [ABSTRACT FROM AUTHOR]

Economic crisis has compelled public enterprises to explore new management options. Currently used management model of state enterprises reached an impasse due to the plethora of reasons. Therefore, fundamentally new management decisions were necessary, with guidelines approved by the government and laid out in conception of increasing effectiveness in state enterprises. It is essential to agree with the provisions of management system's representatives of state enterprises regarding fundamental disadvantages of current model and to take into account their constructive proposals. It is assumed that conception of increasing effectiveness diminishes the competencies of the state enterprises as a strategic management body, by allowing only the evaluation and resolution of strategy's content disputes. This responsibility requires strategy preparation oriented towards strategic development guidelines of analogue countries. It is recommended to select board members while using integrated procedures, which would provide the possibility to integrate professional competences and personal characteristics of applicants. "Traditional" selection processes cannot ensure this, where only prepared business plans by applicants are assessed. Nevertheless, authors propose to form boards only in the strategically important objects and provide them with the right to appoint managers of enterprises. [ABSTRACT FROM AUTHOR]