A lot has changed in a year. In February 2011, the Commission was compiling information on the expanding role of Chinese state-owned enterprises (SOEs). Since then, the debate has noticeably swung in favor of those believing that SOEs are a global economic problem, one which requires considerable improvement in American policy.[1] How to make that improvement, unfortunately, has not been settled.

There are two components to the SOE challenge. The original and fundamental matter is the sealing off of China's huge internal market in order to protect and enhance SOEs. A new issue, less important now but perhaps equivalent in the long term, is the expansion of SOEs into the U.S. and other markets outside China.

The two are obviously related but require distinct policy responses. With regard to the Chinese market, the Communist Party's commitment to SOEs is so strong that only a decisive and extended American effort, implemented at the highest level, has a chance to lead to a significant reduction in government support. The most effective response to long-term Chinese competition outside the PRC is improving long-term American competitiveness both at home and in third markets.