between Taiwan and mainland China has worsened or improved environ-
mental outcomes.
DOMESTIC ORGANIZATION OF BUSINESS IN CHINA
Until the late 1970s, the Chinese economy was fully socialist. The state
controlled the production and distribution of goods and services through state-
owned enterprises (SOEs). The SOEs fell under one of four levels of
government: central, provincial, municipal, or county. Enterprise directors
attained their posts through the elaborate nomenklatura system dominated by
the Communist Party, not because of their qualifications as entrepreneurs; and
they held control irrespective of the performance of the factories or firms. No
SOE went bankrupt. Because the state controlled all significant enterprises, it
could influence their actions. However, in its first three decades the Chinese
state lacked any core interest concerning the preservation of biodiversity, and
enterprises wasted nature.
By 2005, goods and services in virtually all economic sectors were allocated
by the market, and most prices now reflect forces of supply and demand.
Economic reforms under the leadership of Deng Hsiaoping changed
fundamentally China’s economic structure, but did not eliminate the SOEs. By
the end of 1993, China had about 130000 SOEs. Then they accounted for
approximately half of industrial output (but received 90 percent of government
subsidies).^2 By the twenty-first century, the economic share of SOEs had fallen
to around 35 percent, but they remained important in core heavy industrial
areas such as oil production, coal mining, machine building, and utilities.^3 As
we note throughout, oil/gas exploration, development and transportation, as
well as hydropower development, pose great risks to threatened species and
ecosystems. The SOEs’ relative lack of productivity and profitability^4 remains
one of China’s largest economic difficulties, addressed haltingly by the
regime, because they provide income and job security to millions of workers.^5
For example large-scale layoffs in the state sector reduced SOE employment
to 78 million by 2002, and caused unrest because the non-state sector was
unable to absorb the large number of unemployed workers.^6
After the reform era began in 1978, a few pilot programs delegated
decision-making authority to managers and instituted rewards for perform-
ance. Since 1984, factory directors have become responsible for decisions,
which greatly increased the autonomy of SOEs. Reforms in the late 1990s
emphasized ‘ownership restructuring’ in SOEs, but in the estimation of
observers, the somewhat diversified ownership structure has not motivated
officials to ‘refrain from opportunism and act like true owners’.^7 Thus, while
SOE directors and managers have greater autonomy, the nature of their
Business organizations and biodiversity conservation 135