Has China’s Economic Reform Improved Enterprise Performance? a Dea Evaluation of China’s Large and Medium Enterprises

This paper attempts to investigate whether China’s economic reform has improved enterprise performance, and what determine enterprise efficiency in the context of China’s transition. Contrast to the results of improving enterprise performance measured by TFP from other studies, this paper find that there is a general tendency of divergence of enterprise efficiency rather than a convergence of firm’s efficiency as is expected from a competitive market. Similar to other studies, this paper has also confirmed that SOEs are less efficient than COEs. Why SOEs are less efficient, and how do Chinese firms respond to China’s gradual economic reform and increasing market competition? Further econometric analysis suggests that firms of different ownership types seem to respond similarly to catch up with technology frontier, indicating that firms’ efficiency gap may arise from their historical legacy; enterprise reform characterised by profit retention program have improved firms’ efficiency at the initial stage of reform, but this positive effect has been diminishing; market competition seems to be working, but ineffectively. JEL Codes: D24, L23, P31, P27