1. Definition of State Owned Enterprise.
State Owned Enterprises (SOEs) can be defined as nationalized corporations which are publicly owned by the state or government and usually exist in communist countries. In our case example, Anshan Iron and Steel Corporation in China, is the oldest and largest industrial base in the northeast Liaoning Province, had been losing money over the past couple of years after failing to get through the nationwide reform run in state-owned enterprises.
2. Anshan Iron and Steel Corporation
With China economic reforms to establish an open market and government's aim to make SOEs financially independent, Anshan was pressurized to perform by improving its business systems and operational efficiencies and reducing cost.
Anshan was able to extricate itself from its unprofitable status through technological innovation and increasing their efficiency of its management process. This was done through its collaboration with UEC Technologies LLC (a subsidiary of United States Steel Corp).
Anshan replaced its open-hearth furnaces with technically advanced converters and introduced the hot-rolling production line, resulting in reduced costs and better quality steel.
"These are the most profound, most significant changes in State-owned enterprises," as commented by Wen Shizhen, secretary of the province's Communist Party Committee in the People's Daily Online dated August 16, 2000.
3. Why is there a need to change?
China's State Owned Enterprises are dominant employers in China with 70% of the labor and capital employed. Despite such enormous amount of labor and capital involvement, the out put from these companies is only a mere disappointing 40%. This is a statistical sign of the inefficiency of SOE management
As other sectors of the Chinese industries 'modernized', the SOE sector falls further behind. There is an enormous burden on the national budget as the sector continues to operate inefficiently. The sector either...