Last month, reports that the Chinese government would reform state-owned enterprises gave shares of listed SOEs a big one-day boost. Over the weekend, guidelines for the reforms were released and, yesterday, stocks fell — and rightly so.

The impact of substantive reform would be huge. SOEs account for two-fifths of GDP, according to Goldman Sachs, and they employ one-tenth of China’s workforce. Neither capital nor workers are particularly productive, though. Reliant on state support and artificially cheap capital, SOEs tend to have far lower returns on equity than private enterprises. SOEs (excluding banks) have delivered virtually no earnings growth over the past five years, Macquarie points out. Over the same period the private sector profit growth was in the double digits.

Reform will not be easy to achieve. Vested interests are hard to unseat and allowing large employers to go under, or even deliver big cost savings, is politically difficult. Details of the new proposals are scant. Share sales will be encouraged, but the SOEs that trade already prove that a public listing hardly guarantees productivity.