Monetary Incentive and Property Rights Structure of Socialist Enterprises: China’s Experience

During the ten years from the pilot reform of enterprise distribution system in 1978 to the contracted responsibility system promoted across the country in 1987, China's state-owned enterprises have experienced a series of decentralization of power and transfer of profits reforms aimed at expanding the autonomy of enterprise management and encouraging the employees to work hard. All these institutional changes were trying to relax or even free enterprises from the constraints of the centralized, unified revenue and expenditure distribution system, and to give full play to the role of material incentives through setting and expanding the funds that an enterprise is entitled to retain and reward funds while strengthening the ideological education. The fact that statistics shows that the annual corporate profits are increasing is a reflection of the original intention of reform.