Hon S. Chan & David H. RosenbloomHon S. Chan & David H. Rosenbloom

City University of Hong KongCity University of Hong Kong

What are Public Enterprises in the US?An expansive definition of public enterprises in the U.S.

would include:1. Government Corporations(1) Wholly owned: Tennessee Valley Authority, U.S. Postal Service

(2) Mixed ownership: Federal Deposit Insurance Corporation; National Railroad Passenger Service (Amtrak)

(3) Created by Federal Statute

2. Government Sponsored Enterprises(1) Privately owned, created by federal statute: Federal National Mortgage

Association (Fannie Mae); Federal Home Loan Mortgage Association (Freddie Mac)

(2) No authority to make financial commitments on behalf of government

2

What are Public Enterprises in the US?An expansive definition of public enterprises in the U.S.

would include:

3. Special Districts Primarily local government units with independent taxing authority: Water,

sanitation, parks

4. Public Authorities Government units with power to issue debt, sue and be sued, eminent

domain: Port Authority of or New York and New Jersey (1921)

3

A Brief History of Federal Government Corporations and Sponsored Enterprises in the United States

Bank of the United States (1791-1811); Second Bank (1816-1836)

World War I, the Great Depression, and World War II: Federal Deposit Insurance Corporation and the Tennessee Valley Authority

1945 Government Corporation Control Act

1960s, Government Sponsored Enterprises: COMSAT (1962)

4

Primary Purposes1. Utilization of private businesses for public goods—e.g., public

works

2. Private goods in nonprofitable fields—e.g., social security, rural electrification, and low cost housing

3. Government enterprises where private business is like to be unsatisfactory—e.g., strategic natural resources

4. Government enterprise for natural monopoly goods—e.g., electric power production

5. ‘Apolitical’

6. Corporate form for efficiency and flexibility

7. Right to sue and be sued

5

Constitutonalizing Government CorporationsLebron v. National Railroad Passenger

Corporation (1995)

Kelo v. City of New London (2005)

6

What are Public Enterprises in the PRC?One the six major organizations in PRC, along with the

Chinese Communist Party (CCP), state, military, mass organizations and service organizations

Depending on location and the nature of the enterprise, cadres employed by the public enterprises are classified in job title lists at various levels and managed in accordance with the principle of Party controlling cadres

7

Multi-Layer Supervisory Scheme: The Case of CNECC (China Nuclear Engineering and Construction Corporation)

8

CCP Central Committee

CNECC’s Party Core Group

Personnel and Labor Department

Key distinctions between US and Chinese enterprises

9

Elements American enterprises Chinese enterprises

Feature As government-created entities, operated through market transactions and generally able to cover the costs of their operations, not central to the nation’s economy

As dragon-head enterprises in key sectors, created to support the government & to generate revenues to sustain a sizeable number of bureaucracies, central to the nation’s economy

Origin Substitutes for government agencies rather than business

Extensions of government agencies and business

Purpose Sector-specific public purposes Comprehensive policy responsibilities, a vital instrument of state policy

Tools of control

Mainly market-based regulations, other measures including legislative oversight, executive appointment of leadership, and public review, etc.

Enterprise nomenklatura, upholding the principle of Party controlling cadres; featured by multiple-principal supervision

Reform focus

Constitutionalization of actions affecting individual rights

Increasing the strong (but necessarily competitive) position of Chinese dragon-head enterprises in international economic order

Challenge Economic failure Agency problem

ConclusionsU.S. public enterprise reform is largely a legal matter

Chinese public enterprise reform is primarily a reflection of local economic nationalism

Regulatory approaches differ significantly in the U.S. and ChinaU.S. regulators are usually separate from promotersIn China regulation and promotion go hand in hand in a decision

making system in which political concerns are typically dominant

It is sometimes said that globalization breeds convergence. However, China and the U.S. are likely to remain on divergent paths during the coming decade

10