Direction (1-5): Read the following passage carefully and answer the questions given below it. Certain words have been printed in bold to help you locate them while answering some of the questions.

According to company lore, Yunnan Baiyao, a musty-smelling medical powder, played a vital role during the Long March. As China’s Communist troops fled from attacks in the 1930s, trekking thousands of miles to a new base, they spread its yellow granules on their wounds to staunch bleeding. To this day, instructions on the Yunnan Baiyao bottle recommend application after being shot or stabbed. Many Chinese households keep some in stock to deal with more run-of-the-mill cuts. But the government has recently put its maker into service to treat a different kind of ailment: the financial weakness of state-owned enterprises (SOEs). Yunnan Baiyao has emerged as a poster-child of China’s new round of SOE reform. The company, previously owned by the south-western province of Yunnan, sold a 50% stake to a private investor earlier this year. The same firm had tried to buy a slice of Yunnan Baiyao in 2009 but was blocked. Its success this time has been held up in the official press as proof that a push to overhaul sluggish state companies is at last gaining momentum under Xi Jinping, China’s president. But for many investors and analysts, the Yunnan Baiyao case proves just the opposite: that SOE reforms are stuck in a rut. The sale, after all, left half the company in state hands. And a traditional Chinese medical powder is far removed from industries such as energy and finance, which the government deems strategic and is less willing to open to private capital.

It is hard to overstate the importance of getting SOE reforms right. In the 1980s, when China was starting to open to the world, the state sector dominated its economy, accounting for nearly four-fifths of output. A big factor behind China’s remarkable growth since then has been the relative decline of SOEs, to the point that they account for less than a fifth of output today. As state firms stood still, a vibrant private sector sprouted around them. Over the past few years the state sector has, by several measures, stopped shrinking. There are still more than 150,000 SOEs in operation, two-thirds owned by local governments and the rest under central control. Private firms are much more productive, but state firms gobble up a disproportionate share of resources. They take about half of all bank loans and are the main culprits behind China’s big increase in corporate debt. Since 2015 investment by SOEs has grown faster than private-sector investment, reversing a decades-long trend. For China this has the makings of a damaging cycle. As growth slows, the government leans on SOEs to spend more; but this drives up their debt further and so weighs on the economy. Putting a stop to this sequence is vital for China if it is to become wealthy. The IMF estimates that an ambitious programme of SOE reform could expand the Chinese economy by nearly 10%, or about $1trn, over the next decade. The fate of China’s state firms is also a global concern. By international standards, they are already massive. China’s 200 biggest SOEs account for 9% of global revenues in coal mining, 6% in car making and 5% in construction. A series of mega-mergers currently under way is concentrating even more power in the hands of a few, giving them the heft to barge into new markets. For foreign firms this can smack of unfair competition, as if they are fighting against the Chinese state. The temptation for other countries to block foreign investments by SOEs will only increase, setting the stage for bitter disputes.

1. Yunnan Baiyao’s success is a proof that state owned enterprises are getting momentum.
2. Because governments are talking certain steps for the reform of state owned enterprises.
3. Because a private investor bought 50 % stake in Yunnan Baiyao.

1. In 1980’s SOEs dominated China’s economy.
2. According to passage, decline of SOEs is responsible for growth of China.
3. Stop in growth of state owned enterprises is responsible for growth of private firms.

1. In 1980’s SOEs dominated China’s economy.
2. According to passage, decline of SOEs is responsible for growth of China.
3. Stop in growth of state owned enterprises is responsible for growth of private firms.