Endowment Structure, property rights and reforms of large state-owned enterprises (SOEs) in China: Past, present and future.

• Our paper attempts to rationalize the classified reforming nature of China's state sectors, based on the criteria of factor endowment structure of SOE sectors adopted between 1980 and 2018. • We argue that ceteris paribus, the problem of low efficiency and rent-seeking commonly suffered by China's state-owned sector, has been cured by applying a reform strategy that undertakes property right reforms based on the factor endowment allocation of SOEs across different industries. • In terms of the theoretical contribution, we construct a Nash bargaining model between the principal (state officials) and the agent (SOE manager), and identify two ownership reform irrelevance points (ORIPs) in the model. • Our Nash bargaining model indicates the need for some SOEs to be undertaken by the 'mixed-ownership reform' whilst others should undergo 'full privatization reform'; both are judged by the distinct factor endowment allocation amongst different industries, which are in line with the stylized facts of China's state sector reforms over the past four decades. • In the final section, we discuss the possible policy implications of this paper with particular reference to our proposed Nash bargaining model. Based on the criteria of the factor endowment structure of state-owned enterprise (SOE) sectors in China between 1980 and 2018, this paper rationalizes the classified reforming of China's state sectors by constructing a Nash bargaining model to capture the dynamics of ownership restructuring, and the reduction process of policy burden on SOEs. We reveal that the interplay between policy burden bared by SOEs and the ownership restructuring process largely depends upon their factor intensities since the reform period in the 1980s. Our model identifies two Ownership Reform Irrelevance Points (ORIP), which serve as the benchmark for the dynamics of the ownership restructuring process of China's large SOEs, which saw them move from 'mixed-ownership' to 'privatization'. ORIPs demonstrate the need for a reduction in social policy burdens with regards to the state sector's comparative advantage of factor endowment structure through SOE ownership restructuring. This study theoretically analyzes existing literatures on the classified reforms of China's state sectors from 1978 to 2018. This study is the first to base such an analysis on the criteria of factor endowment structure focusing on the connection between the policy burdens bared by SOEs and their ownership restructuring process. [ABSTRACT FROM AUTHOR]