Bargaining Success of Chinese Factories

Abstract

Based on interviews and a questionnaire administered to 25 factory directors in November 1988, this study investigates factors that determine the bargaining power of large and medium-sized Chinese factories. It shows that directors of larger, higher-ranking factories are more successful in preserving autonomy and gaining concessions and exemptions from their supervisory agencies on salary and bonus pools and distribution, on tax rates, and on personnel decisions. It relates the Chinese experience to discussions of "soft budget constraints" in socialist Hungary and shows that many politically significant directors wish to maintain protected, dependent relationships with their supervisors and are hesitant to support radical ownership reforms that would decisively increase autonomy and might enhance efficiency.

Keywords: China, factories, soft budget constraint, Hungary, state-owned enterprises

JEL Classification: D23, D74, L20, O54, P22, P27, P32, P59