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ECONOMY

Domination of State-Owned Enterprises

China runs a bifurcated economy. While a robust and competitive private sector dominates industries like clothing, food, and factory-assembled exports, sectors of strategic importance such as railways, financial services, utilities, energy, telecommunications, education services, and health care are generally not open to private investment. These protected sectors are extensively controlled through government interventions and often dominated by large SOEs.
The 1990s saw big changes for SOEs, as the government forced companies not making a profit to either merge into larger corporations or to file bankruptcy. Many of these remaining SOEs have since become private companies. They have emerged as modern, restructured, share-holding firms listed on the domestic stock market. But even though the Chinese government has legally separated itself from these companies or sold a minority of their shares, either the state or local governments or SOEs often retain the majority of the shares.
The Chinese National Bureau of Statistics uses a very strict definition and views SOEs as only those economic units where 100 percent of the shares are owned by the state. The most important of these SOEs (currently 117 corporations) report directly to a special commission under the State Council…