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China: Breaking the taboo

The enormous enthusiasm international investment bankers showed when China began floating state-owned companies in 1993 has cooled markedly. The poor market performance of the early issuers has slowed the flow of new ones. But signs are that the Chinese authorities are adopting a more realistic approach to attract back foreign investors. Sophie Röell reports.

Four years ago the word privatization was taboo in China. "When I came here in 1992 nobody would talk about it," recalls one investment banker, "and we had to be very careful about mentioning that kind of thing."

Now there is even a sign outside the building where China Eastern Airlines is working on the company's long-awaited New York listing indicating the "China Eastern Privatization Office".

With nearly 40 Chinese companies already listed on international exchanges, or authorized to list, and two official domestic stock markets plus a further 17 informal ones scattered across the country, the adoption by the Chinese of privatization as an acceptable part of the language should not come as much of a surprise.

Add to that the fact that in 1993 the non-state sector already accounted for nearly 60% of industrial output and that China's state statistical bureau expects the state's share to shrink to 25% by the end of the century, and there can be little doubt that a dynamic process of privatization is going on.

But surprise is exactly what it does cause. "Even I was taken aback," says CS First Boston's chief representative in China, Carl Walter, on seeing the sign at China Eastern's headquarters in Shanghai, a view shared by other bankers who warn that even today privatization is a word that is discouraged in China.

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