Economy

Why China Is Still So Far From A Free-Market Economy

Taking inventory
Taking inventory
Zhu Xiaochun

-Analysis-

BEIJING - Most agree that state-owned enterprises, which have long been at the core of China's economy, must be reformed. That begins with fundamental changes in the way that such entities are managed, both by increasing the separation between state oversight and individual management, and the separation between management and ownership.

The establishment in 2003 of the SASAC, the main body that oversees China’s state-owned enterprises, has helped create a more independent system and established a wide variety of rules and regulations. The effect has been that these enterprises, especially those owned by the central government, are getting stronger and bigger. More and more of them are making it into the rankings of the world’s Top 500 companies.

However, this doesn’t mean that China has found the right path to truly make these enterprises compatible with the market economy.

We are convinced that only private companies can truly be separate from the public administration. The reason is simple. In markets, property rights belong to the private firms, which means they are truly independent. The government has no authority over the way they are handled, except to create a legal framework in which they operate.

Meanwhile, state-owned enterprises' property rights belong, in theory, to the people, but the custodian is the government: thus these firms are tantamount to being government-owned. This is why talk about “the separation between administration and enterprises” is not convincing. On one hand if the state does not interfere with the state-owned firms’ operation it will behave contrary to its role as the trustee of the people. On the other hand, if it does interfere this contradicts the economics of property rights.

For instance, a core power in an enterprise is the right to make high-level personnel appointments. But in Chinese state-owned firms, the power is still in the hands of relevant government departments. Any major decision must be approved by the SASAC. This demonstrates that there is no real separation between the government and the enterprises.

A recent SASAC report lauded the supposed reform in the management of state-owned firms, including “the full respect of the property rights of the legal person and autonomy in management as an independent market entity.” But again, the meaning of the so-called “property right of the legal person” is not any true kind of property right. Without governmental approval, no state-owned entity is entitled to dispose of any of their assets. So what sort of reform is this?

As for the operational autonomy such as strengthening supervision, improving assessment and accountability, performance-based salary, and financial control…etc., they are just the norm for any private company.

First step: property rights

The essential step in any real reform is the reform of property rights. As long as this remains unchanged, in other words, where a real owner is absent, the fundamental shortcoming of the state-owned firms will not improve.

Here, the owner refers to the true owner who would take full responsibility for the firm’s gains or losses. In brief, as long as the situation remains the same, China’s state-owned enterprises can only stay as what they were meant to be, and can only assume the mission handed to them of providing public goods to society. They can never be the economic entities they would be in a market economy.

And with state-owned entities currently so inflated that they have become the country’s main economic bodies, it implies that this country doesn’t operate a market economy, or at least not a full one.

Take China’s five state-owned banks, for instance. As long as we insist that these large banks belong to the state, the state will be obliged to assume the obligation and responsibility of securing their deposits.

Whether it’s about the implementation of the deposit insurance system or interest rate marketization, the first reform would be to privatize the banks. At the very least, they need to get rid of their “fully state-controlled” nature, so as to become mixed-ownership banks that conform to the essence of a modern enterprise system.

It’s ludicrous to imagine that you can just immerse state-owned firms or state-owned banks completely in the market, and let the law of “survival of the fittest” play out. Like other industries, were China’s banks to undergo real reform, the reform of their property rights has to be the initial step.

Macroeconomic data shows that China is at great risk for an economic downturn. On the one hand, stimulus policies are needed to curb this decline, but on the other hand, there is excess production capacity in many sectors. The profit margins of the small and medium size companies, in particular the private ones, have been squeezed.

As all experts point out today, new reforms are necessary. We sincerely hope that China’s reform of its system of state-owned enterprises will withstand the pressure and take risks on the path toward success.

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Society

Harder Time: How Egypt Cuts Prisoner Communication With Loved Ones

Letters from inmates provide a crucial link with the outside world, and yet the process of sending and receiving them in Egyptian prisons is both arduous and arbitrary as an extra means of control.

Relatives speak with defendants during a trial in a Cairo court.

Nada Arafat

CAIRO – Abdelrahman ElGendy says letters were a crucial lifeline for him during the time he spent locked up in five different prisons between 2013 and 2020. "Letters were not only important, they literally saved my life," he says. "I was only living because I was looking forward to them from one visit to the next, and I would read them over until the paper became worn and torn."

Last month, the family of imprisoned software engineer and activist Alaa Abd El Fattah — who had been held in remand detention for over two years until his referral to emergency trial last week — announced it would take legal steps to ensure that Abd El Fattah is able to send letters to them following a period when prison authorities refused to allow him any correspondence.

According to the family, besides prison visits once a month, Abd El Fattah's letters are the only way they can gain assurance of his condition, and when his letters are denied, that in itself is an indicator that his treatment in detention is worsening. The numerous legal requests and official complaints by the family have been met only with silence by authorities.

While letters provide a crucial link between prisoners and the outside world, the process of sending and receiving them in Egyptian prisons is an arduous one as a result of arbitrary restrictions put in place by authorities.


Mada Masr spoke with a number of former prisoners about their relationship to letters during their incarceration and the way prison administrators constrained their right to send and receive correspondence.

Two letters per month

The law regulating Egypt's prisons and the Interior Ministry's prison bylaws stipulate that prisoners have a right to send out two letters per month and that prison administrators may allow more than two at their discretion. Prisoners are also legally entitled to receive letters.

Those sentenced to hard labor — a type of sentence that in practice usually entitles prisoners to fewer visits — are allowed to send one letter a week, and prisoners in remand detention technically have the right to exchange letters with family and friends at any time. However, in all cases, prison bylaws grant prison authorities the right to monitor, censor and refuse any correspondence sent and received , a power the Egyptian Initiative for Personal Rights deems a "violation to the personal freedom of prisoners, as it intrudes on their privacy."

A form of punishment

Prison authorities often restrict prisoner letters as a form of punishment, a measure that came under the spotlight when correspondence from Abd El Fattah to his family was arbitrarily cut off for an extended period last month.

Mohamed Fathy, a lawyer, says that Abd El Fattah's family pursued all possible legal procedures to push for allowing the exchange of letters with him, the last of which was a report submitted by the family to the Maadi District Court. This was preceded by an official notice through a court bailiff to the head of the Prisons Authority and telegraphs to the interior minister, Prisons Authority director and the superintendent of Maximum Security Wing 2 of Tora Prison Complex. Abd El Fattah's mother, Laila Soueif, also sent official requests to the superintendent on a daily basis.

Outside the gates of Tora Prison

Aside from the legal procedures, Soueif spent over a week waiting at the gates of Tora Prison Complex in the hope of receiving a letter from her son, a circumstance that gained particular urgency after Abd El Fattah signaled he was contemplating suicide during a detention renewal session in September.

This marked the second time that Abd El Fattah's family has embarked on a legal campaign in order to be granted their right to exchange letters with him. As the coronavirus pandemic first gripped the world in early 2020, the family went through a similar struggle after authorities halted all prison visitations as part of its COVID-19 restrictions.

During this period, letters became the principal form of communication between prisoners and the outside world. The Interior Ministry halted all prison visits from March until it reinstated them again in August 2020, though they were restricted to once a month.

Gendy, who was released from prison in January 2020, one month before the outbreak of the coronavirus in Egypt was officially announced, says that even in ordinary circumstances, letters were of vital importance since only direct family members are allowed visitation rights.

He says he used to give his family around 10 letters during every visit, addressed both to family and friends. "I used to keep an open letter to write to my mother about everything that was happening because the visitation time did not allow me to tell her all the details," he says.

Arbitrary restrictions

Even though the right to correspondence for prisoners is enshrined in the law, in reality, the process is an arduous one for both prisoners and their families due to the conditions of Egyptian prisons and arbitrary restrictions put in place by authorities, according to the accounts of several former prisoners.

It typically begins when the prison warden announces the visitation schedule for the following day. Prisoners hurry to pen letters before lights out, though some continue to write in the darkness. A prisoner who has a scheduled visit then gathers all the letters from his cellmates and hands them over to his visiting family members, who in turn give them to the rest of the prisoners' families outside, either in person or via WhatsApp if the family lives in another governorate.

In parallel, the families of prisoners who share a cell often create a WhatApp group to inform each other about visitation times. "Some families in nearby governorates send physical letters inside with the families that have scheduled visits. But those who live in remote governorates and who cannot afford to travel to the prison simply write letters and send pictures of them to the WhatsApp group," says Amgad Samir*, who was imprisoned for two years in Tora Prison Complex and was the facilitator for letter exchanges in his cell.

Marked in red

According to Samir, families would print out the letters sent via WhatsApp to deliver them to the prisoners, but the prison administration would sometimes not allow the entry of printed letters, so some families would volunteer to rewrite them by hand. "The sister of one of the detainees in Alexandria would rewrite dozens of letters in one day and would ask the children of some of the families to help her," Samir says. "Some families would send their letters with more than one person to make sure that at least one version made it inside."

Any letter being sent or received from prison is required to first be reviewed by the National Security Agency (NSA) officer stationed in the prison, who usually delegates a subordinate officer to read the letters before allowing them through or to "mark them in red," at which point the officer reads the letters himself to approve or deny them, according to Samir. After this screening phase is over, explains Samir, the officer hands over the letters to the mail facilitator, a designated prisoner, who then hands them out in the cell. "I would look at the faces of those who had letters sent to them, it was as if they had just been released," Samir says.

Khaled Dawoud, a journalist and the former head of the Dostour Party who was released from prison in April after nearly one and a half years behind bars, says that prison authorities tightly restrict prison correspondence. "Everything in prison is cracked down upon: food, clothes and even letters," Dawoud says.

According to Dawoud, the NSA officer in Tora Liman Prison, another maximum security facility in the complex, would sometimes force prisoners to rewrite their letters after redacting sections describing things like prison conditions, for example, to avoid them making it into the press or being circulated on social media.

Disseminating information about prison conditions can even lead to further prosecution, as was the case with imprisoned attorney Mohamed Ramadan in December 2020, when he was rotated into another case by the State Security Prosecution after he was ordered released on charges of "sending letters from prison with the intention of destabilization."

Photo of three women speaking with imprisoned defendants at a Cairo court

Relatives speaking with defendants at a Cairo court

Stringer/APA Images/ZUMA

Fear of being forgotten

Banning letters is a form of punishment and pressure that authorities deploy arbitrarily against prisoners, according to lawyer former detainee Mahienour al-Massry, who has spent time in prisons. She tells Mada Masr that following the reinstatement of prison visitations in August 2020, after they had been halted amid the coronavirus outbreak, the National Security officer in Qanater Women's Prison told her she had to choose between visitations and letter correspondence, but that she couldn't have both. Massry refused the ultimatum, and after negotiating with the officer, was eventually granted "exceptional" approval for both under the condition that she only send two letters a month.

"Even though letter correspondence from prison is a legal right that is non-negotiable, there were always negotiations and struggles about sending and receiving them, about how many letters were allowed, and about their content," she says. "Prisoners inside for criminal offenses were in a different situation from political prisoners. The latter had a chance to talk and negotiate, whereas the former did not."

Massry recalls a situation when the NSA officer in Qanater took back some letters that she had initially been allowed to receive. "He said, 'I don't have a reason. This was an order from the National Security Agency. You could try next time, maybe they will go through.' They are moody like that," Masry says. The letters were returned to the family, who then delivered them to Mahienour in a subsequent visit without any objections from the officer. Another time, a letter was confiscated because it had the term "son of a bitch," which the officer deemed "foul language."

Looking for something to say

During an earlier stint in prison in 2016 in Damanhour, Massry did not receive any letters for a month. When she went to the officer to inquire after them, she found that he had a pile of letters addressed to her on his desk. She says the officer simply told her: "Sorry, I didn't have time to go through them all."

After the coronavirus outbreak in March 2020, letters to and from prison were banned for two months in Tora Prison Complex while visitations continued to be suspended until August. During this period the prison was overwhelmed with letters, as they were often the only form of communication with detainees. According to Dawoud, the National Security officer was unable to go through hundreds of letters a day, even with the help of another officer. After long negotiations, the officer finally approved the sending of letters to and from prison under the condition they did not exceed two passages.

Dawoud says that he used his letters to simply reassure his family with brief sentences. "Sometimes I couldn't find anything to say because on the one hand, I can't speak about prison conditions, otherwise the letter would be confiscated; and on the other hand I couldn't talk about personal issues," he says.

Despite that, the short letters were enough for Dawoud to check in on his father, who was battling cancer and eventually died. "One sentence was enough for me to know that he was okay. It was enough for me to be reassured," he says.

News about COVID-19

In certain cases, letters have taken on additional importance beyond allowing families and prisoners to check in on each other.

Samir says he was able to help out a foreign cellmate who was charged in a criminal case without the authorities ever informing his consulate or assigning him a lawyer. Samir was able to tell his wife about this prisoner in a letter, but he made sure to use coded language in order to evade surveillance.

Samir would also use coded language to pass on information about COVID-19 in prison that would otherwise be flagged and confiscated by the NSA officer. "We replaced the word 'corona' with 'mosquitoes.' I would write that someone had been bitten by mosquitoes yesterday, and my sister would understand what that meant," he says.

Using this simple code, Samir was able to communicate the prison's coronavirus situation to the outside world until the officer realized that someone was passing along information and pressured him to confess. "I had two choices: either lie and say that there was a mobile phone in the room, or tell him the truth. I told the truth," he says. As punishment, he was not permitted to exchange letters for a period before the officer finally allowed it again.

"The importance of letters does not just lie in their content," Gendy says. "They are also a testament that people outside still remember you, because the fear of being forgotten is every prisoner's worst nightmare."

*Pseudonym


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