Hon S. Chan & David H. Rosenbloom City 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 ( ); Second Bank ( ) 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 Purposes 1. 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 Corporations Lebron 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 ElementsAmerican enterprisesChinese enterprises FeatureAs 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 OriginSubstitutes for government agencies rather than business Extensions of government agencies and business PurposeSector-specific public purposesComprehensive 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 ChallengeEconomic failureAgency problem

Conclusions U.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 China U.S. regulators are usually separate from promoters In 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