Why are SOEs so bad ? Because the "West knows Best" ? China has been "saddled" by "hugely inefficient" SOEs since before Deng Xiaoping's time. Why then China's economy has been growing at break neck speed yet to be matched by any post WW II economies ?
Below are my take on China's SOEs that most Western economists do not want to talk about.
Type 1 SOEs : China created certain SOEs for the main purpose of preserving employment. These are the genuine "inefficient" ones. Instead of laying off the people and pay them unemployment and other social hand outs like Western countries, it is the Chinese government's philosophy to offer them employment instead to preserve their dignity and Chinese's work ethics. You can see the same philosophy in China's foreign policy which rarely offers foreign aids like her Western counterparts. Instead, China helps other countries by offering investment in business and infrastructure projects with low interest loans. In doing so, Chinese treats them as equals. Back to those SOEs. Overtime, as China's per capita income improves, these type of SOEs will slowly disappear. But the priority is not on reforming them (i.e. make them profitable by laying off people), but on making people less dependent on them for employment (i.e. create other better paying job opportunities).
Type 2 SOEs : There are certain industries that will never be profitable, but are of great importance to China's economic development. A good example of those is the railroad. US's rail transport is essentially all privatized. At the other end of the spectrum, the Indian rail transport is part of the government's Ministry of Railways. How well both work is for all to see. China has chosen the middle approach via SOE and has the best result to show among the three. These SOEs are hardly "inefficient" and provide services to Chinese citizens that are the envy of the rest of the world.
Type 3 SOEs : There are certain industries that are strategic to China's survival as a nation. Example of these are the shipping, ship building, energy and energy services, defense and certain financial segments. These have to be state controlled and supported. Imagine a powerful foreign government put sanction on any company that ship goods for China and China has no strong shipping companies of her own. Like Type 2 SOEs, majority of Type 3 SOEs can hardly be called "inefficient" as Western media would want you to believe in.
A good example of a US Type 2 SOE is the USPS. Its a money loser, but its popular and essential to many of the smaller communities across the USA. You cannot imagine the importance of USPS and what the US will be without it.
A good example of a US Type 3 SOE is the pre-breakup AT&T. With it, the US lead in telecommuncations technology, and it helped birth breakthroughs such as the Unix operating system and the C programming language. Guess what happened with this entity was broken up? The US ceded its telecommunications lead to the Europeans and the Japanese and you have all sorts of shitty mobile and internet providers across the landscape.