By Chen Xiaohong, Enterprise Research Institute of DRC

Research Report No. 160, 2008

I. Changes in the Layout of the State-Owned Economy: Process and Basic Features

The changes in the proportion of the state-owned economy to the national economy can be roughly divided into two stages: the stage from the beginning of reform to the early 1990s and the stage after the early 1990s.

1. 1978 ～ early 1990s: the proportion of the state-owned economy began to fall but remained in the dominant position

Development was fairly fast for the enterprises of all forms of ownership. From 1978 to 1992, the total number and income of China's enterprises above the township level as independent accounting units in the industrial sector respectively rose from 378,000 and 441.9 billion yuan to 502,000 and 2,586.6 billion yuan. In particular, the number of the state-owned enterprises (enterprises of public ownership at the time) rose from 84,000 to 104,000 and their combined income rose from 5.9 billion yuan to 669.3 billion yuan. In the construction sector, the number of enterprises rose from 6,602 to 14,536 and their combined output value rose from 80.8 billion yuan to 217.4 billion yuan. In particular, the number of the state-owned enterprises rose from 1,996 to 4,985 and their combined output value rose sharply to 143.2 billion yuan. In the wholesale and retail sector, the number of enterprises rose from 1.466 million to 10.063 million and their combined retail consumer goods rose from 207.1 billion yuan to 991.63 billion yuan (the data without indicating source are quoted from China Statistical Yearbook or related calculations).

The proportion of the state-owned enterprises began to fall. In the industrial sector, the output value proportion of the state-owned enterprises to that of the whole industrial sector dropped from 77.6% in 1978 to 54.6% in 1990, with all other indicators being also visibly lower. In the construction and commercial sectors, the proportion of the state-owned economy also declined tangibly. The proportion of the output value of the state-owned construction enterprises fell from 70.2% to 65.7%, while the proportion of their commercial retail also fell from 51.4% to 41.3% during the same period. But the state-owned economy still occupied a dominant position in the national economy.

From 1985 to 1990, in terms of the output value proportion of the state-owned enterprises, the number of trades with their proportions being below 50% rose minimally from 10 to 11. But the number of trades with their proportions being below 30% rose from four to seven (Table 1). The proportion of the electric, machinery and equipment manufacturing trade was 49%, lower than 50%. During this period, the trades where the output value proportions of the state-owned enterprises were below 50% were mostly those dominated by urban and rural collective enterprises or those where the state-owned and collective enterprises had more cooperation. They were mostly in the light industrial trade where family and small factories could develop and could acquire raw materials nearby.

Table 1 Changes in Industrial Output Proportions of Public or State-Owned (Including State-Held) Industrial Enterprises

	1985	1990	1995	2000	2006
Above 50%	27	26	16	13	8
50-30%	6	4	11	13	3
Below 30%	4	7	10	11	27
Total	37	37	37	37	38

Notes: ①The output value proportions for 1985 and 1990 were those of the public enterprises, the proportions for 1995 were those of the state-owned enterprises as independent accounting units, and the proportions for 2000 and 2006 were those of the state-owned and state-holding enterprises. ②The trade data for 1985, 1990 and 1995 were the output values of the enterprises above the township level as independent accounting units, the data for 2000 were those of all the state-owned enterprises and the enterprises above the state-designated scale, and the data for 2006 were those of all the state-owned enterprises and the non-state-owned enterprises with core business revenue being above 5 million yuan. ③There were relatively few trades whose data were available for the time before 1990. ④The trades were all those with grade-two codes. ○5 The 38 trades for 2006 included the used and waste resources trade and the recycle and processing trade.

Source: Estimates were made according to China Industrial Statistical Data and China Industrial Statistical Yearbook.

2. After the early 1990s: the proportion of the state-owned economy continued to fall and gradually got stabilized

From 1993 to 2006, the output value of China's enterprises in the whole industrial sector rose sharply to 34,824.8 billion yuan (based on the output value of all the state-owned enterprises and the enterprises above the state-designated scale X 1.1). During this period, the number of the state-owned enterprises dropped from 105,000 to 25,000 and their combined output value rose from 2,272.5 billion yuan to 9,891.0 billion yuan. In the construction and commercial sectors, their total output value and total retail consumer goods respectively rose from 205.4 billion yuan and 519.4 billion yuan to 4,155.7 billion yuan and 7,461.0 billion yuan (the data without indicating source are quoted from China Statistical Yearbook).

The proportion of the state-owned economy continued to fall during this period. In the industrial sector, the state-owned economy saw its output value proportion continue to drop from 46.9% to 30%. It also saw its employment fall sharply from 44.98 million people to 18.04 million, with its share of total industrial employment declining from 43% to 23.9% (the fall for the whole industrial sector was 17%). But its fiscal and tax revenue increased and still accounted for a fairly high proportion. In the construction sector, the proportion of the state-owned economy dropped from 37.4% in 1993 to 22.1% in 2006. In the commercial sector, the state-owned economy also witnessed a drastic drop in its proportion.

The changes in the proportion of the state-owned economy during this period presented some new features. In the industrial sector, the proportion of the state-owned economy dropped from 50% to about 30%. The number of trades, where the output value proportions of the state-owned enterprises were below 50%, reached 30, accounting for 70% of all the trades of the industrial sector. The drop in the proportion of the state-owned enterprises eased gradually. Of the 18 trades where the proportion of the state-owned economy dropped from over 50% to below 50% during this period, 10 trades did so before 1995, three did so before 2000 and five did so after 2000 (Table 2). Most of the trades where the proportion of the state-owned economy already dropped below 50% in the 1980s now see the proportion drop below 20% or even below 10%.

Table 2 State-Owned Economy's GDP Proportions (%, 2006)

	Primary industry	Secondary industry & construction	Tertiary industry	National
Industrial proportion	5.8	33.3	50.6
National proportion	0.68	16.31	19.92	36.9

Source: Estimates were made according to the total amount of the value-added data and the profit, wage and tax data in China Statistical Yearbook and the yearbooks of agriculture, real estate, finance, information and other professions.

In the service sector, the development of the state-owned enterprises varied in different sectors. But the state-owned economy still occupied the dominant position and scored marked development in the basic service trades of finance, communications and aviation. However, the state-owned economy's proportions in the trades of construction, retail and real estate were relatively low.

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