Property Rights Transaction and Alleged Asset Stripping A case study on the establishment of a foreign joint-venture in China

This case study shows the complicated process of business negotiations and government interventions which leads to the establishment of a manufacturing joint-venture between a Chinese state-owned enterprise, NCF, and an American multi-national corporation, PPG in January 1993. The case illustrates how the unclearness of property rights over the assets of the state-owned enterprises have led to conflicting objectives and fragmented control by different government agencies over the property rights transaction. The establishment of a joint-venture seems to have clarified the property rights over the assets in the joint-venture company, part of which are owned by the state. However, this may have been achieved at the costs of selling cheaply valuable state assets while retaining liabilities and low value and less sellable state assets in the existing state-owned enterprise. The case raises an important policy issue on whether joint-ventures with foreign corporations could be used as a vehicle to improve the productivity and value of the state assets.