SOE Reforms Enter Crucial Stage
China currently boasts large amounts of state-owned assets, but the efficiency of their operation and contribution to public welfare still needs to improve. In recent years, contradictions between state investors and SOEs, as well as conflicts of interest between SOEs and government, the market, and society, occasionally emerged. In addition, the management mechanism and system that guarantee SOEs and the huge amount of state-owned property serve society are less developed. These problems are hard to solve solely through the efforts of SOEs. The requirement to complete a state assets management system put forward at the Third Plenary Session of the 18th CPC Central Committee calls for, in line with the modernization of national governance system and governance capacity, clear and specific thought to ensure deep and substantial SOE reforms.
Future Trends
The Third Plenary Session of the 18th CPC Central Committee pointed out that SOEs are owned by the entire people of the country, and hence a major force in propelling modernization and ensuring people’s common interest. In the long run, whether SOEs should quit certain industries or to what extent they should retreat is not the key point. What is vital is to innovate the management system and mechanisms to improve the development of state-owned economic sectors and increase their contribution to the entire national economy and people’s livelihood. On top of that, our vision should not be limited to state-owned economic sectors by focusing on efficient operation of existing state-owned property. What we need is a broad view of all of society, the world, and the future. Global, sustainable perspectives should be adopted in guiding SOEs to better complement enterprises under other ownership. Meanwhile, SOEs are expected to contribute to the country’s healthier, more competitive and sustainable development.
A decision on major issues with regard to comprehensively advancing the rule of law adopted at the Fourth Plenary Session of the 18th CPC Central Committee in October 2014 aims to provide a legal guarantee for the top-level design of comprehensively deepening reforms. The decision requires improved capability to deepen reforms, facilitate development, resolve conflicts, and maintain stability through the rule of law.
In a sense, the decision offers a guideline for deepening SOE reforms. Several points concerning state-owned assets are apparent in the decision when it mentions “better administration in line with law” and “accelerate to build a law-abiding government.” For instance, it stresses the performance of government functions according to law while boosting the legalization of institutions, extent of authority, procedure, liabilities and so forth. Administrative bodies are not allowed to claim their rights beyond the law, nor can they infringe on the legitimate rights and interests of civilians, legal persons and other entities, or impose extra obligations without a legal basis.
A government power list system will be introduced in efforts to exclude power rent-seeking. The decision pledges to separate powers with regards to excessively centralized departments such as state-owned assets management sectors. It also pledges the carrying out of independent audits on power use. State-owned assets and resources and SOE executives’ fiscal performances will all be audited.
To conclude, the decision signifies clarification of the relationship between government and enterprises, as well as standardization of the actions of the main bodies that supervise and operate state-owned assets.
YU JING is director and researcher at the Enterprise System Division of the Institute of Industrial Economics, Chinese Academy of Social Science (CASS).
