State-owned assets 'need to be further capitalized'

More funds should be put into social security system, says CSRC chief

China's State-owned assets need to be further capitalized to promote economic reform and their liquidity in the capital markets should be strengthened, Guo Shuqing, a leading candidate for central bank governor, said on Wednesday.

Guo, who is the chairman of the China Securities Regulatory Commission, made the remarks while attending a forum held by Caijing magazine in Beijing.

The economic overhaul should focus on the development of both State-owned and private companies, Guo said.

He suggested putting more State-owned assets - including those from State-owned banks and insurance companies - into the social security system to serve that purpose.

"They can shift 30 percent of their assets, instead of the current 10 percent, to the social security fund for preserving and increasing the value," Guo said.

"And the wage system of SOEs should also be improved to add to their vitality," he added.

Now it's the time to achieve a breakthrough in terms of the State-owned enterprises' reform, by capitalizing State-owned assets and letting the private sector and the public hold shares, said Chen Qingtai, former deputy director of the Development Research Center of the State Council.

In terms of the reform of SOEs, China should pay more attention to the management of public capital for the benefit of its ultimate owners, said Gene Tidrick, a former World Bank senior economist.

About 40 percent of SOEs are still operating at a loss, and there's no evidence that SOEs are good at innovation or efficiency, he said.

The government should make sure that SOEs allocate their dividends timely and provide compensation for their particular public services, instead of intervening directly, according to Tidrick.

Selling non-performing State-owned assets or declaring SOEs running at a loss as bankrupt would be better than integrating dying companies with those performing well, he said.

However, Gao Liang, a former official at the National Development and Reform Commission, said that privatizing SOEs would probably constrain the country's capability for independent technology innovation, as domestic private players are not strong enough and foreign capital would end up playing a major role.

"Some believe that SOEs should be backed up by the government to realize State strategies and maintain economic stability. It's nonsense. Otherwise other major economies would have done the same thing," said Qin Xiao, the council chairman of the Boyuan Foundation, a Hong Kong-registered think tank.

Sheng Hong, director of the Unirule Institute of Economics, said that the reform of China's SOEs could be called a "failure", because policy discrimination against the private sector worsened, and the public can hardly get its dividends.

According to Sheng, the tax rate for SOEs stands at 10 percent, while private companies get a tax rate of 24 percent.

At the end of 2011, China had 117 central SOEs that held assets worth 28 trillion yuan, mainly operating in the energy, telecommunications, transportation and defense industries.

China's SOEs have long been blamed for dominating the market, and calls for reforms to break their monopolies intensified after the government introduced its 4 trillion yuan stimulus package in 2008, which consolidated the market position of SOEs.

Wang Yong, head of the State-owned Assets Supervision and Administration Commission, said earlier that SOEs must be more market-oriented as a major part of the overall reform.

The country should redefine the roles of SOEs and break up monopolies in certain industries, diversify ownership, and lower entry barriers to private firms, said the World Bank in a joint report with the Development Research Center of the State Council, which was published in February.

Contact the writer at wangxiaotian@chinadaily.com.cn