I remember the meeting of the Asian Development Bank’s board of directors way back in the spring of 1992 very well…
Representing the United States during a review of a Chinese finance sector loan, I asked what I thought was a straightforward question, “Isn’t it time for China to begin privatizing state-owned banks and companies?”
After a pregnant pause, the attack from the other board members began.
“Why is America always so impatient?”
“These things have to be done slowly and carefully.”
“The Chinese will develop a privatization plan that suits their needs and culture.”
Dealing With the Consequences
Well, here we are, more than 20 years later, and China remains a semi-market state at best. There’s still too little market and too much state.
Half the Chinese work for the Chinese government or for state-owned or controlled companies. One quarter of state-owned companies are unprofitable, but state-owned companies grab 90% of bank lending. The top five state-owned banks control 80% of total bank lending.
The country has had so many lost chances:
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