SOEs to implement top-down reforms

2017-01-16 08:44Global Times Editor: Li Yan ECNS App Download

Stronger Party role, mixed ownership among highlights: experts

Experts said that 2017 will be the year when China's State companies implement top-down reform designs laid down in 2016, following an important annual meeting of the heads of China's centrally administered State-owned enterprises (SOEs) in Beijing on Thursday and Friday.

The State-owned Assets Supervision and Administration Commission (SASAC) has ordered central SOEs to make breakthroughs in their mixed-ownership reforms and to take concrete steps in sectors including electric, petroleum and military industries, domestic newspaper Guangming Daily reported Friday.

The SASAC said central SOEs should aim for a 3 percent increase in profits and strive for a 6 percent growth in 2017.

In 2016, SOEs administered by the nation's State-asset regulator saw profits go up 0.5 percent year-on-year to 1.23 trillion yuan ($178 billion), the SASAC said in a statement posted on its website Saturday. Growth was up after a 5.6 percent decrease in 2015.

Revenues of these firms increased by 2.6 percent from 2015 to 23.4 trillion yuan and the companies churned out taxes and fees totaling 2.1 trillion yuan, up 3 percent year-on-year.

Feng Liguo, an expert at Beijing-based China Enterprise Confederation, said on Sunday that 2016 saw the completion of top-down policy designs, and in 2017 the highlight will be how the State-owned sector carries out the economic reforms.

"This implementation process will cover the full period of the 13th Five-Year Plan (2016-20)," Feng told the Global Times.

The China Economic Weekly reported on January 3 that 2016 saw the roll out of seven specific policies on deepening SOE reforms, following a guideline issued by the State Council, China's cabinet, in September 2015. A set of blueprints has been drawn out to guide reform implementation, the report noted.

Three-pronged reform

"Specifically, the highlights are three-pronged: the shift from managing State-assets toward State-capital, restructuring through mergers and acquisitions and mixed-ownership reforms," Feng said.

"The Chinese society and media have a big appetite for State-sector reforms, making the actual undertakings of these reforms appear slow. But given the vast complexity of SOE reforms, we should be doing one thing at a time and there is no one-size-fits-all approach for carrying out the various reforms in separate sectors," noted Feng.

China has 102 centrally administered SOEs, down from 196 in 2003, and they manage the bulk of the country's state assets.

In 2015 and 2016, a total of 22 central SOEs were restructured through mergers. As for the figures on growth targets put out by the SASAC, Feng said they are superficial and not as vital compared with reform measures to be taken in 2017.

"If the global commodities market rebounds, or SOEs facing poor financial books choose to reduce their costs in an aggressive fashion, then the 3-percent profit growth target will be achievable. But what matters is how reforms are carried out and to what extent the competitiveness and efficiency are improved," Feng said.

The SASAC statement also said the Party unit will have a bigger role in corporate governance in SOEs.

Wang Jiang, director with the Beijing-based Central SOEs Think-tank Alliance, said the imbedding of Party organization into the corporate governance is a step aimed at fixing the weakening of Party control that occurred at some SOEs during reforms.

"The imbedding will bring more efficiency into and speed up the decision-making process at SOEs. This area is still under exploration, especially the question of how to maintain party leadership in joint ventures where State capital is only a minority stakeholder," Wang told the Global Times Sunday.

Wang said that mixed-ownership reforms are aimed at tackling the solidifying role of State capital.

"Some listed arms of central SOEs have as much as 80 percent stakes in the hands of State capital, making their corporate governance unlikely to be improved. It means that State capital in these firms failed to play a leveraging role by denying the participation of other forms of capital, lacking vitality and influence," Wang said.

One problem in mixed ownership is that the vast difference in size makes reform at the group level unrealistic, according to Wang.

"By assets, two oil giants are bigger than all of the top 500 private companies combined. But mixed-ownership in smaller subsidiaries of SOEs can be expected," noted Wang.

Feng said pilot programs in SOE reforms to be carried out in 2017 will allow the regulators to gain experience, and fix issues as they appear.


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