MARKET ENTITY BEHAVIOR OF CHINESE STATE-OWNED ENTERPRISES

As a consequence of the 1978 Chinese economic reforms, there have been a number of changes within China's industry. First, firms have been g iven limited autonomy in management. Second, firms now have control ov er the scale of production and production profitability after fulfilli ng the required plan. Third, some production factors have become firm controllable. Fourth, firms are now faced with a dual price system-a p lan price and a market price. Thus, state-owned enterprises are now ab le to, at least, partially mimic the privately owned market-oriented f irms. Given this situation, we examine the effect of economic reforms on the productivity of the Chinese state-owned enterprises within the Iron and Steel Industry using data envelopment analysis (DEA), In the context of a mixture of centrally planned and market economies with bo th controllable and uncontrollable production factors, we measure the technical efficiency and scale efficiency. The allocative efficiency m easure for DEA employs an assurance region (AR) method, which illustra tes the potential of AR in evaluating Chinese industrial performance w ithin the reforms. In addition, the current study explore's input cong estion and scale economies. These two measures provide insight into an d lessons for further economic reforms. This paper thus presents an ex tended use of DEA models in an attempt to improve and monitor firm-lev el productive efficiency of Chinese industry. (C) 1998 Elsevier Scienc e Ltd. All tights reserved.