The hope is that healthier state companies will ease pressure on the banks, which can then be restructured to better respond to market demands. A program of mergers, bankruptcies and sell-offs of SOEs was launched at the 15th Communist Party Congress in September. Zhu gave enterprises three years to clean up their act. Most of the other 370,000 enterprises will be left to sink or swim in the marketplace, although many may be absorbed by their bigger brethren. Plans call for China's 800-odd automakers to consolidate into three or four giants.
Instability is a real danger.
Since SOEs provide their employees with schools, houses, health care and other social services, layoffs mean more than just job losses. The government is trying to weave a social-security net, but the magnitude of the unemployment could overwhelm it. On top of the 8 million Chinese officially unemployed, the SOE reform could put 2.7 million more out of work by 2000. Already, protests are erupting in many places. Last week, some 2,000 laid-off workers in Anhui province took to the streets.