Notes Preface 1. See, e.g., Wang (1998a). Wang and Nolan (1998) contains several of Dr Wang’s papers on Chinese enterprise reform as well as one long paper of my own. Chapter 1 1. My own contributions to that debate, especially in relation to China, were pub- lished in various places (Nolan, 1990, 1993a,b, 1994, 1995). 2. The Pennsylvania Railroad employed 110 000 people by 1891, probably the world’s then largest business (Schmitz, 1993: 19). Chapter 2 1. For example, between 1992 and 1997, revenues rose by 59 per cent at GE, 53 per cent at Ford, 33 per cent at Shell and 34 per cent at GM. Employment in these giant firms rose by just 19 per cent at GE, 12 per cent at Ford, and fell by 17 per cent at Shell and 19 per cent at GM (UNCTAD, 1995, 1999). Chapter 3 1. These 100 enterprises were chosen in November 1994. Of these 28 were classi- fied as super-large, 67 large and five medium-sized enterprises. They employed over 1.5 million people and most were members of large enterprise groups in their own right (Huang, Wu and Yao, 1998: 35) with an average of 20 members per trial enterprise group (Zou and Zhang, 1991). 2. These measures, shrouded in greater secrecy than those related to business group development, orient around closer relationships between the banking sector and the chosen LMEs. The 512 LMEs in this ‘vanguard’ were among the largest in the state sector. Although they constituted just 1 per cent of all state firms they accounted for 55 per cent of assets, 60 per cent of sales and 80 per cent of taxes of the state industrial sector (CDBW, 14 January 1998). 3. It is not clear to what extent the 512 ‘focal’ (zhongdian) LMEs are integrated with- in the 120 business groups. Wu Bangguo in a speech referred to the LMEs as ‘belonging to’ 937 938 Notes the trial groups (Sun, 1998: 4). Elsewhere it has been suggested ‘the central government has chosen 512 enterprises to form the basis of these enterprise groups’ (Smyth, 2000: 722). However, many of the LMEs appear to remain independent and there is no mention in the most important policies related to the trial business group development of the role the 512 LMEs play. Nonetheless, at least 70 of the LMEs are core enterprises in the 120 trial busi- ness groups (see Table 3-2 for provincial spread and Table 3-5 in Appendix 1, p. 101 for enterprise examples). Yuchai, a large diesel engine manufacturer, is but one example of a trial LME that is not part of the trial business groups. 4. AVIC and CNMEG. Sinopec was not included in the national team. 5. In particular, publicity has been attached to six groups (Baoshan, Haier, Founder, Changhong, North China Pharmaceutical and Jiangnan groups) which have been granted annual injections of no less than 20 million yuan to help them enter the ranks of the Fortune 500. However, this is not part of a wider parcel of measures specifically aimed at these six groups but instead part of the ‘Ninth Five Year Plan state guide on key technological devel- opments’. This plan has also chosen 166 key technology projects to be funded with state backing. These projects are related to the businesses of the 120 trial business groups and 512 preferred LMEs (CASS, ZGFB, 1998: 120). 6. By 2000 the number of trial groups had fallen below 120 because of a few strong/strong mergers between the trial groups, such as the formation in chemicals of the Donglian Group (Table 3-5 in Appendix 1). In total there are 203 enterprise groups regis- tered at the national level with the State Industrial and Commercial Bureau. By the mid- dle of 1998 there were also a further 1311 with ongoing applications (SCDRC, ZJN, 1998: 705). 7. The Association for the Promotion of China’s Business Groups, established in April 1994 with members from 74 groups, including most of the 57 groups in the first batch of trials. It now has representatives from over 100 of the trial business groups per- manently posted at its headquarters in Beijing. These representatives have all held impor- tant posts and are familiar with the problems facing their business groups. The forum for discussion between groups facilitates the introduction of policies that can be beneficially applied across all the groups. The evidence and descriptions presented here are based upon visits to several of China’s largest business groups in 1998 and 1999 and interviews at the Association for the Promotion of China’s Business Groups. 8. A further two groups were later added to the first batch, increasing the total to 57. 9. There were only 7199 large enterprises in China in 1997 (Table 3-2). Given that enterprise groups are usually based on a large-scale enterprise this would imply that at least a third of all large enterprises were in fact core members of provincially or national- ly supported enterprise groups. 10. These data imply that even within the large-scale sector there are large size dis- parities but that the national team players are amongst the largest. A 1997 study into 1254 large enterprises found only 23 had sales over 10 billion yuan, accounting for only 2 per cent of the enterprises but over 30 per cent of sales and 55 per cent of the profits of these enterprises (CASS, ZGFB, 1998: 115). Table 3-5 in Appendix 1 also describes how the trial business groups in the national team are among the largest in China. 11. See CRES, ZJTGN for yearly updates on provincial- and city-level efforts at nur- turing groups. Lower levels of governments have also initiated their own trials with the mod- ern corporate system, there now being over 2500 provincial level groups undergoing trials. Chapter 3 939 12. According to Jiang Qiangui, vice-minister of the State Economic and Trade Commission (SETC) (CDBW, 17 January 2000). 13. The five mainland companies were: China National Petrochemical Corporation (Sinopec), Industrial and Commercial Bank of China, Bank of China, China National Chemical Import and Export Corporation (Sinochem) and China National Cereals, Oils and Foodstuff Import and Export Corporation (COFCO). The last two are included in the national team and Sinopec is experimenting as a national holding company. 14. In 1999, 435 LMEs were closed, 78 SOEs were involved in debt– equity swaps involving $10.9 billion and 11 million workers were laid-off (CDBW,26 January 2000). 15. The term ‘enterprise’ is used in this chapter even though it is unclear just when autonomous ‘enterprises’ started to emerge from the centrally planned system. ‘Plant’ may in fact be more accurate as many production units were still bound to the planning appa- ratus and governmental control. Building enterprises out of state plants and departments has been a key objective of enterprise reform. 16. During the early and mid-1980s the policy of ‘three no changes’ (san bu bian) held back enterprise reorganisation. 17. This document is published in CRES, ZJTGN (1988: 9–17). 18. It was also at this time that the first articles on business groups began to be pub- lished in Chinese academia. 19. LMEs are defined by industry on standard criteria specified by the State Statistical Bureau (SSB). 20. Of these 431 groups 261 are reported as having large-scale enterprises at their core and 27 had assets exceeding one billion yuan (CRES, ZJTGN, 1992: 308). 21. They had also grown quickly. In the period 1991–6 the four trial steel groups increased their total capital by 295 per cent, and sales by 146 per cent. In chemicals the same respective figures were 314 per cent and 131 per cent (SCDRC, ZJN 1998: 708). 22. Although not all of the groups are industrial enterprises, at least 19 are classi- fied as trade or agricultural groups (Table 3-3), the majority are in fact based around industrial enterprises or have industrial enterprises as members of the groups. The trade groups, for example, appear to possess their own manufacturing facilities. 23. It was at about this time that the policy of ‘three no changes’ (san bu bian) start- ed to be relaxed. 24. Zhang Qi, Head of the Ministry of Electronics (Far Eastern Economic Review, 2 May 1998). 25. Among the first 57 groups there were 46 industrial groups, two foreign trade groups and five in transportation. In the second batch there were 39 industrial groups, six in foreign trade, eight in domestic trade and transportation, four other groups (investment, regional development) and five in agriculture. In total there were therefore 85 industrial groups. 26. Members of The Association for the Promotion of China’s Business Groups have undertaken trips to Japan to discuss industrial policy with leading academics and pol- icy makers and also are great admirers of South Korea’s development model, which they claim to have tried to imitate (interview, Beijing: April 1999). 940 Notes 27. These documents are published in CRES, ZJTGN (1992: 67–71; 1998: 159–62). 28. The groups had established 30 trade companies. 29. Ten of these were listed on foreign stock markets. 30. In 1997 it is reported there were 209 A-share issues, 79 of which were affiliated to the 120 enterprise groups and 100 enterprises experimenting with the modern enterprise system (SCDRC, ZJN, 1998: 709). Chapter 4 1. All references in the following two sections are taken from these sources. For example, the BAe 146’s engines are imported from Allied Signal in the USA.