HOW SUCCESSFUL HAS CHINESE ENTERPRISE REFORM BEEN - PITFALLS IN OPPOSITE BIASES AND FOCUS

We analyze two new data sets: one on state-owned enterprises (SOEs) and another on town and village enterprises (TVEs). We find zero TFP growth in SOEs and positive TFP growth in COEs. The evidence suggests that the positive TFP growth in SOEs found by some recent studies might be due to underdeflation of gross output and overdeflation of intermediate inputs. The criterion for successful SOE reform should also include intertemporal efficiency and SOEs' contribution to macroeconomic stability. Increases in technical efficiency do not necessarily improve SOEs' financial performance. SOE personnel have received an increasing proportion of value added, hence creating a fiscal crisis for the state. (C) 1994 Academic Press, Inc.