Employee Ownership in China

According to some reports, employee ownership is sweeping China; according to others, it is still just an occasional experiment. According to some government officials, employee ownership should be strictly limited to 20% of a company; other officials say it should be encouraged on a wide scale.

These divergent views come out of a recent conference on employee ownership in Beijing coorganized by the NCEO and the China Research Center. It is clear that at least some significant employee ownership is occurring at the township and village enterprise (TVE) level. This is the basic unit of local government in China, accounting for most of the country's enterprises. Many TVEs are in the process of transforming these enterprises into more market-driven companies, either selling them off, selling part of their ownership, or transferring ownership to worker-owned cooperatives. The cooperative movement is a spontaneous one, not sanctioned by specific federal law. Just how much of it has occurred is not possible to assess accurately and, as noted, estimates vary considerably.

At the central government level, the state owns most large enterprises. Some of these are making stock available, limiting the amount to minority interests. Employees have been eagerly buying shares in the companies, largely because the Chinese are great savers and have few investment options. Discussions at the highest levels of Chinese government are underway about further transformation of these enterprises.

Officials from the Chinese State Committee on Economic Restructuring took very different views of what course any new rules should take on employee ownership, one arguing that it should be limited to 20% at all levels, another arguing that it should be encouraged far beyond that. Predicting what course the government will take is simply not possible at this time, but, at the least, the possibility exists that employee ownership could play a substantial role in the future Chinese economy.