One Difficulty of SOE Reform in China

This is perhaps one of many reasons why the reform of state-owned enterprises (SOEs) in China is an uphill battle.

According to Willy Wo-Lap Lam in his book The Era of Jiang Zemin (Prentice Hall 1999), Jiang Zemin (江泽民) was known to have given special favors to factories which he was sentimentally attached.

Take for example the Shanghai Yi Min Foodstuffs Co where Jiang worked as a vice-director for two years in the early 1950s.

By the early 1990s, Yi Min had fallen on hard times due to factors such as having too many retirees on its payroll.

In a meeting in early 1994 with then Shanghai Party boss Wu Bangguo (吴邦国), Jiang reportedly said, "You must not let it fail", adding that the municipality had to take "active measures" to bail it out. Why?

As Lam wrote: "It was a matter of face - and feudalism. Beijing's top leaders considered it de rigueur that institutions, factories and farms where they had worked be seen as model units."