China SOE reform: bumpy, crucial ride ahead
- By Zhang Lulu
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E-mail China.org.cn, March 28, 2015
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| Liu Shijin, vice minister of the Development Research Center of the State Council. [Photo/China.org.cn] |
Liu Shijin, vice minister of the Development Research Center of the State Council, agreed that breaking monopolies can be a key point in the reform of the country's state sector.
Liu cited examples in China's oil, telecommunications and railway industries, where some individual SOEs have taken up a gigantic part of the market. Private and foreign capital can be invited into those industries to compete on a level playing field, he said.
China's cabinet, the State Council, issued a reform plan for the power industry two days ago, pledging to open up the sales and distribution business, but electricity transmission still remains in the hands of state companies.
Shao Bingren said the plan still did not quite meet expectations, as transmission holds the tightest grip on the power industry, and thus the SOE monopoly still remained.
The corporate governance of China's SOEs has also raised concerns.
Currently, SOE heads and other senior positions in the companies are appointed either by the Organization Department of the Central Committee of the CPC, the Party's key department for appointing positions, or by the national or local SOE regulator, the State-Owned Assets Supervision and Administration Commission.
Panelists at the forum agreed that those who fill such posts should be chosen by the market rather than appointed by an administrative body.
China's SOEs have long been criticized for inefficiency. They contribute about one third of the country's GDP, far less than their less-advantaged private counterparts, and returns on SOEs' assets, a key indicator of asset performance, are around 6 percent lower than those of their private peers. SOEs also have higher liabilities.
Without resolute reform, the low returns and high liability of SOEs "will damage the national economy in the long run," Shao Bingren said.
A full blueprint for SOE reform has yet to be released.
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