Conclusion: Decentralisation and the ‘Double Explosion’

Abstract

The Chinese enterprise reforms since 1979 have taken the form of decentralisation. The process of decentralisation has been carried out along two lines: the first is to delegate more powers to local governments mainly through the scheme of revenue-sharing between the central government and local governments in order to give local governments more initiative in local economic developments; and the second is to delegate more powers to state enterprises, mainly through the scheme of profit-retention in order to make the enterprises more interested in increasing profits. In the following, we will look at the second line of decentralisation and see what has changed in the state-enterprise relations since the reforms.