SOE Reforms Enter Crucial Stage
Third is developing mixed ownership economy and exploring the employee stock ownership system. Some local governments have drafted schemes and targets with respect to mixed ownership reforms.
Fourth is accelerating the securitization of state-owned assets, so leveraging the role of the market to a greater extent in the allocation of resources and facilitating strategic readjustments of state-owned capital distribution.
Fifth is reforming and perfecting the state property management system, standardizing and developing investment operation platforms for state-owned capital, reforming the authorization operation system, and optimizing stated-owned assets supervision and administration.
Sixth is upgrading SOEs to a perfect modern corporate system. This entails deepening human resource reforms, fixing appropriate salary levels of senior SOE managers, whose business expenses must be strictly regulated, promoting de-administration in the appointment of SOE executives, and encouraging the employment of market-based professional managers.
Three Relationships to Be Straightened Out
In the past year, progress has been made in both centrally administered SOEs and local SOEs. However, the top-level design of SOE reforms is still in process. In light of even more complex domestic and international situations, deepening SOE reforms requires accurate apprehension of reform development and the overall situation.
The first is the relationship between pursuing market-oriented reforms and adhering to socialism with Chinese characteristics. Some claim that, in terms of SOE reforms, pursuing market-oriented reforms will alter the nature of socialism, while socialism will distort market mechanism. This is an arbitrary explanation. Even Western mainstream economic theories have to admit that the perfect, omnipotent market does not exist.
In an incomplete market, an SOE is a measure through which a state regulates its social and economic development. It has a complementary and substitutive relationship with other economic systems. Western practices have proved that, as other economic systems mature and become complete, the range of SOE applications may narrow. When social and economic fluctuations and imbalances occur in a country, the range of SOE institution applications tends to broaden. Meanwhile, SOEs in each country are evolving. In an economic structure where the market is an effective factor and plays a decisive role in allocating resources, SOEs develop and conform to standard market competition.
China’s SOE reforms have now entered a crucial stage where the primary task is to learn from the experience of other countries in developing their economic structure, based on China’s reality. On one hand, we should emphasize the principle of streamlining administration and delegating more power to lower levels in order to activate enterprises’ market vitality. On the other, the compatibility of market-based reforms and socialist development must be ensured through strict supervision and regulations, as well as pragmatic innovations.
The second issue is the relationship between SOE reforms and economic development and transformation. SOE reform is encompassed in China’s overall economic development and transformation. In the past few years, growing uncertainty and restrictions have overshadowed the international situation. China’s economy, meanwhile, is transforming after years of high-speed growth into the new but normal state of moderate growth.
China’s industrialization process has entered its middle and later period wherein the investment-driven growth model is facing a bottleneck while economic and social progress is calling for a new motivating force. Advanced concepts also need to be introduced in various industrial activities to usher in a new stage of development and transformation.
China’s industrial economy structure is expected to change dramatically in the next two to three decades. SOEs and private companies, both major parts of China’s microeconomy, are expected to be able to adapt to potential changes. Deepening reforms ought to create favorable conditions for companies that conform to the demands of future development and transformation. It is important to bring SOEs’ current resource superiority into full play while overcoming or even breaking institutional constraints. What’s more, SOEs are advised to take on the tasks of industry transformation and strengthening the nation’s comprehensive competitive power.
The third is the relationship between state-owned assets reforms and SOE reforms. Thomas Piketty, author of Capital in the 21st Century, pointed out that public assets in China, in the form of state ownership, take up around half of its national capital. On the basis of wealth generated by capital being allocated on a more equal basis, China might well avoid making the mistakes of other countries, and achieve a positive compromise and balance between public capital and private capital.
