China's Corporate Reform Yields a Different Kind of Profit

Fixing up China's state-owned enterprises (SOEs) has been on Beijing's to-do list for decades. But as the companies have become increasingly buried under mountains of debt, addressing their deep structural flaws has once again moved to the top of the government's agenda. Chinese leaders are now working to speed the process of diversifying the firms' shareholders beyond the state, to expand corporate debt-for-equity swap programs and to phase out massive "zombie corporations" operating at a loss, all in hopes of keeping the nation's most important conglomerates afloat. Beijing's idea of successful reform, however, has little to do with instilling market principles and everything to do with preserving the power of the state....