BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/38
China’s large SOEs have vast holdings that extend to businesses completely unrelated to their core business and tolerate much lower productivity than private firms. Under the reform plan, productivity would be boosted e.g. by increasing private minority stakes and having SOEs divest firms that perform poorly or are unrelated to the core business and provide opportunities for corruption. For example, state oil company CNPC owns hotels it now must sell. The reform plan calls for the closure of unprofitable SOEs, which seems difficult given the political backlash officials will likely face from such actions.