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No. 278, 2005-1-14 Topic: the Logic of affiliation
 
 Author:Unirule  
Time:2009-09-17 14:12:45   Clicks:


the Logic of affiliation 
Lecturer:Dr. Guo Rui, Huawen Group 
Discussants:Professor Han Chaohua, Chinese Academy of Social Sciences (CASS);Professor Liu Junhai, CASS;Prof. Mao Yushi, Unirule Institute of Economics;Prof. Zhang Shuguang, Unirule Institute of Economics;Prof. Sheng Hong, Unirule Institute of Economics 
 
 
There are two approaches about the definition of affiliation phenomenon, one is that affiliated firms are private firms under the name of collective firms, the second one is that government is always discouraging it. Mr. Guo contends that it can not reflect the essence of affiliation phenomenon. 

Mr. Guo, then analyzed the reason for failing to eliminate affiliated firms from the rent-seeking perspective. He contends that government agencies have great impact on affiliated firms, such as the leaders, the finance etc. Affiliated firms thus created many opportunities of rent-seeking. It accounts for the failure of eliminating affiliated firms.

He then analyzed some factors behind reforms, such as finance pressure, political pressure. But why there are so many affiliated firms, Mr. Guo contends that it is due to the regulation policy and discrimination policy against private firms. So there is a principal-agent problem, central government wants to terminate affiliated firms. However, all of these measures will be carried out by local governments which have great interest in these affiliated firms. And this dilemma is difficult to overcome. He contends that the only solution to it is to treat all firms without discrimination.
 




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