Socialism continues to strangle the economic performance of state-owned firms in China.
As one firm, the Chongqing Iron and Steel Group, nearly emerged from decades of poor performance, the city government forced the firm to buy another poor performing steel mill. The slow pace of reform may be due to Communist leaders’ persistent belief in public ownership, the Communist Party’s belief that a successful firm is one that employs many people (not necessarily one that makes the most profit), and finally, firms’ disincentive to invest in research and development because they must demonstrate short-term results to the government.
See John Pomfret, The New York Times, June 19, 2001