What is special about enterprise performance in North-East People’s Republic of China? Dynamics of privatization, profitability and productivity during the Reform Era

Using the annual survey on large and medium-sized industrial enterprises in People’s Republic of China (PRC) by the National Bureau of Statistics, this paper examines enterprise performance in north-east PRC, in the light of growing regional disparities in income and wealth in the PRC.

The north-east region has a high concentration of state-owned enterprises and was the PRC's old, heavy industry base, but the paper demonstrates that this has not affected the region's capacity to privatise rapidly. It argues that improvement in profitability and productivity of enterprises in the northeast PRC is as significant as in the rest of PRC, but that there are still performance gaps that are specific to the north-east region.

The paper concludes that these are caused by:

• geographic factors, such as climate and distance from overseas Chinese market-oriented economies, such as Hong Kong, China and Taipei, China
• a need for institutional reforms that could improve its local business environment. These include improving the quality of bureaucracy, implementing the rule of law, controlling corruption, encouraging local financial sector development, and reducing barriers to inter-province trade and investment.