Academic journal article Management International Review

Reform and Restructuring in a Chinese State-Owned Enterprise: Sinotrans in the 1990s

Academic journal article Management International Review

Reform and Restructuring in a Chinese State-Owned Enterprise: Sinotrans in the 1990s

Article excerpt

Abstract

* This paper traces the reform process within Sinotrans, a Chinese state-owned enterprise (SOE) in the service sector. Government acting as regulator as well as sole owner creates conflicts of interests that complicate the management strategy of SOEs.

* The core problem facing the management of Sinotrans was to resolve the conflict between changing government policy and need to control an integrated logistic network.

Key Results

* Effective organizational change in Chinese services SOEs requires the withdrawal of government interference in management decision making and the separation of operation and regulation.

Introduction

China has continued to reform its state-owned enterprises (SOEs) since the adoption of the Open Door Policy at the end of the 1970s (Peng 1997). The objective of the government is to expose SOEs to market forces to raise efficiency and competitiveness (Child/Tse 2001). Organizational change plays a vital role in achieving the transition from the old style Chinese SOEs to modern competitive operators in the global marketplace (Lim/Sziraczki/Zhong 1996, Benson/Zhu 1999).

Reforming Chinese SOEs has not been a smooth process because of institutional and cultural complexities (Child 1994, Peng/Heath 1996). Reform can only be effected within the organizational transformation of the whole institution (Shenker 1996). To date, most research has focused on the manufacturing sector (Warner 1995, Pan/Parker 1998, Benson/Zhu 1999, Huang 2001). There is very little research on reforming SOEs in the service sector. The conventional wisdom regards China as a strong low-cost manufacturing base, and the Chinese government has been reluctant to open its service sector to international competition, because of its weak competitive position (Kapp 2001). Therefore, there is a paucity of research concerning the reform of service sector SOEs through the development of organizational capabilities. This study analyses the way in which Sinotrans, a service sector SOE, carried out organizational change in order to survive in domestic and international markets. It also explores the implications for transforming similar Chinese SOEs in the service sector.

The case for deregulation and private sector management in the Chinese service sector follows naturally from the widespread liberalization in manufacturing. A state-owned logistics firm would become progressively incapable of dealing with the multitude of private sector clients that result from rapid growth and liberalization. Despite the pressure from the newly liberalized sectors, totally free entry and exit have not been promoted in the service sector, nor have the regulatory and operational functions of the incumbent been separated. This resistance to services liberalization in China is compounded by the movement from a system of substantially independent, provincially segmented industries, to an integrated single market at national level. As the markets for goods are increasingly organized nationally, it follows that logistics has needed to be similarly organized, thus putting a huge strain on Sinotrans' provincially-centered system. The purpose of this paper is to trace the impact of these developments on Sinotrans, the SOE logistics company.

In the following sections, we review the relevant literature to identify the gaps in respect of organizational change undertaken by SOEs in China. Then, we present a profile of Sinotrans and the research methods employed in this research. Next, the empirical findings are discussed and several theoretical propositions are derived on organizational change within Chinese SOEs in the business to business service sector. Finally, we evaluate the contribution of this research and suggest areas for future study.

Theoretical Background

Organizational change has been a key theme in management research in recent years (Pettigrew/Wordman/Cameron 2001). …

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