When Wei Zhang, founder of Yuanhao Capital, a Shanghai based investment firm, visited Shanghai Pujiang Cable a few years back, the state-owned enterprise was in dismal shape, unable to pay back its bankers the money it had borrowed from them.

But Mr Zhang’s driver was impressed. “I asked him why he thought this company was so impressive,” Mr Zhang recalls, surprised the man had a view at all. “He told me, did you see the parking lot where the management park their cars? There are at least 20 luxury cars there!”

Where the driver saw prosperity, his employer saw a symptom of the general dysfunctionality of most of China’s state-owned enterprises. At the time, the top tier of Shanghai Pujiang’s staff earned only about Rmb3,000 ($450) a month. It was predictable then that virtually every major supplier to the manufacturing company was headed by a relative of senior management; almost everyone in a position to engage in related party dealings did so and padded their expenses generously. Nobody gave a thought to the fact that customers often did not pay their bills for years, let alone made an attempt to collect the money owed.