Abstract
Because state enterprises come from different levels of government and have varying degrees of state participation, the important question arises as to what “state enterprise” means in the Chinese context. The answer can best be found at the enterprise level. A major state enterprise in the electronics sector, ZTE Corporation, is chosen for analysis. This chapter traces how state enterprise reform progressively yielded a reduction of state ownership with the loss of state control, shows how this control was exercised lightly, and how pursuit of and/or compliance with state strategies have benefited the enterprise. The enterprise’s operations also speak specifically to how issues like agency costs are handled in Chinese enterprises and generally to areas of divergence between Chinese governance and governance as commonly understood.
China’s state enterprises are not retreating but advancing. This is bad for China and for the world.
(Article heading, the Economist, July 20, 2017)
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Notes
- 1.
VASs refer to non-core services that complement basic telecommunications services like phone calls. Examples are voice mail, short message service (SMS), and dial back, services which telecoms operators typically charge extra for.
- 2.
The last two preferences were terminated in 2000.
- 3.
A-shares in this case refer to RMB-denominated shares which can only be traded in the Shenzhen Stock Exchange.
- 4.
H-shares are shares of a company incorporated in the Chinese mainland that is listed on the Hong Kong Stock Exchange or other foreign exchange. Although H-shares are regulated by Chinese law, they are denominated in Hong Kong dollars and trade the same as other equities on the Hong Kong exchange.
- 5.
For details of the slit-share reform, see Chap. 3.
- 6.
Hou, ZTE’s founder, stated in an interview that ZTE was a private company answerable to its shareholders, and, being publicly listed, also has operations that are transparent and meet international standards (Mountlake, 2012).
- 7.
Some collectives had been leased out to private entrepreneurs to run, with the option of taking the enterprise private eventually (Ralston, Terpstra-Tong, Terpstra, Wang, & Egri, 2006).
- 8.
Questions answered by Top Management H of ZTE Holdings on August 15, 2012, but due to confidentiality, this information was not disclosed.
- 9.
For example, Hou is the President of ZTE Corporation and Shenzhen Zhongxing WXT Equipment Co. Ltd.; Xie Weiliang is the vice-resident of ZTE Corporation, the president of ZTE Holdings, the general manager of Shenzhen Aerospace Guangyu Industry Group Corporation, and the president and general manager of Aerospace Science & Industry Shenzhen (Group) Co. Ltd.
- 10.
Questions answered by Human Resource Manager S of ZTE Corporation on September 2, 2012, but due to confidentiality, this information was not disclosed.
- 11.
Questions answered by Top Management S of ZTE Corporation on October 18, 2012, but due to confidentiality, this information was not disclosed.
- 12.
Peoples Republic of China’s Law on Public Officials had been approved by the 15th Session of the Standing Committee of the 10th National People’s Congress (The Central People’s Government of the People’s Republic of China, 2005b). There are five general administrative levels for public officials—national, provincial, bureau, county, and rural.
- 13.
The hearing was held because ZTE was suspected by members of the US Congress that it would do the bidding of the Chinese government and would pose a threat to American national security if allowed to do business (supply equipment to American companies) there (ICEO Online, 2013).
- 14.
Question answered by Top Management S of ZTE Corporation on October 18, 2012, but due to confidentiality, this information was not disclosed.
- 15.
Questions answered by Human Resource Manager S of ZTE Corporation on September 2, 2012, but due to confidentiality, this information was not disclosed.
- 16.
TD-LTE stands for Time Division-Long Term Evolution, one of two 4G high-speed mobile communications standards, the other being FD (Frequency Division)-LTE. According to Capacity Media (2012), TD-LTE has its roots in China. ZTE is a leading developer of this technology.
- 17.
Question answered by Top Management S of ZTE Corporation on October 18, 2012, but due to confidentiality, this information was not disclosed.
- 18.
Questions answered by Managing Director Z of ZTE Corporation on November 22, 2012, but due to confidentiality, this information was not disclosed.
- 19.
The “Hukou” system refers to the country’s household registration system, which specifies for each household a particular residential location. Residents have full rights and enjoy education and social welfare benefits offered by the state as long as they remain in their specified location, but lose these rights and benefits if they move away without official permission.
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Li, R., Cheong, K.C. (2019). China’s “Commercial” State Enterprises—A Case Study of ZTE Corporation. In: China’s State Enterprises. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-0176-6_5
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