Should China be promoting Large-scale Enterprises and Enterprise Groups?

In light of the perceived failure of enterprise groups in Japan and South Korea, various criticisms have been made of China's industrial reforms. This paper argues that the force of these criticisms has been exaggerated. In conjunction with the non-state sector, large-scale enterprises have been an important engine for growth in China over a sustained period. The Asian crisis is often seen as a manifestation of the failure of relational based governance, but the dismal record of small-scale industries in Central Eastern Europe and the former Soviet Union suggests it is doubtful that rapid privatization and down-sizing would have given better results in China.