China's State-owned Enterprises, Capital Structure

As Normally accepted, the capital structure of state-owned enterprises in China are unbalanced. It is very important to modify the capital structure of state-owned enterprises in order to reconstruct the micro-base of marketing economy.As the deepening of reform of state-owned enterprise, the managers got more and more power on controlling the enterprises. The corporate governance can be described as " controlled by insiders under interference of government" during the transferring period (Jinglian Wu, 1997). The managers of state-owned enterprises pursued the maximum of comprehensive welfare, and changed their financing decisions according to the continued transference of social investment and financing system. The government withdrew from the supporting system, and the state-owned banks served as its substitute; stock market give the managers more choices of direct financing, and the financing decisions of state-owned enterprises thus diversified. Since the problem of unbalanced capital structure occurred mainly in the transferring period, I think the capital structure of state-owned enterprises was the co-result of both corporate governance and the transference of social investment and financing system through the above analysis.State-owned enterprises assumed important social functions without the marketing system, and they developed on the way of involution with disguised unemployment and huge social cost. When the enterprise could not afford the social cost, they turned to the government for capital, and the government used its power to sustain the state-owned enterprises. So, I think the social cost assumed by the state-owned was another important reason causing the unbalanced capital structure.The methods of resolving the problem are due to the understanding of the phenomena and their essence. The managers obtained the controlunder the absence of real proprietor. They reacted to the transference of social investment and financing system, and the social cost assumed by the state-owned enterprises strengthened the reaction. In order to reconstruct the micro-base of our marketing system, it is the only way to change the unreasonable corporate governance of state-owned enterprises. It could be no use of simply selling the state-owned enterprises. Two prerequisites are as followed: (l)set up diversified social investment and financing system to meet the diversified need of different state-owned enterprises; (2)set of social security system to substitute the state-owned enterprises to assume the social functions.