On the road to reform China's SOEs

I am very interested in the SOE reforms to be launched following the important CPC plenum. I believe that a state must retain control of all important national assets, national utility and all important national infrastructures in the interest of national security. Not only is maintaining control of national assets and national utilities a matter of national security for a nation and its people, it is also an issue of sovereignty.

Reform of SOE in China is a high priority for the CPC, and the coming changes are looking to welcome private companies and directors to acquire larger shares of SOEs so they can have a larger say in decision-making. "Private investors can set up private equities to take over 10 to 15 percent of an SOE equity," said Bai Yingzi, director of the commissions enterprise reform division.

SOE reforms will further encourage syndicates of investors to band together to buy into Chinese SOEs or to bid on specific projects. The progressive CPC has been open to private investment in China’s SOEs in the past, with pilot projects like the joint venture between China National Medical Corp and private company Fosun, which was established in 2003. The joint venture allows Fosun to own 49% of the venture.

Bai Yingzi also said, "All kinds of companies could join SOE restructuring." It is nice that CPC is encouraging inclusive private and foreign investments, however, I believe that it may be sensible to give Chinese citizens and domestic private Chinese companies priority on investments. It is important to try to keep as much of China’s wealth in China as possible, and giving priority to Chinese citizens and Chinese-owned companies can not only guard against the flight of Chinese wealth but also spur on domestic consumption and development as CPC moves away from a reliance on the formerly affluent Western markets. I agree that diversified ownership of Chinese SOE is the correct direction, but in my opinion the people of China should have first priority, and certain areas should remain off limits to foreign investors in the name of national security.

I am concerned that the reforms may go too far, but I know that the CPC is much smarter than I am. I believe in the CPC and I support the direction of the SOE reforms. The pilot project between CNMC and Fosun is proof that CPC can oversee a joint public-private venture that allows the private company to own virtually half of the venture. Other nominally socialist national governments in the past have allowed SOEs to be fully privatized but retained the right to regulate and direct the ventures by retaining their right as the state to have final say over all sectors of a society and its economy. I believe that 10 to 15 percent is a sensible share to offer to the private sector at this stage of the SOE reforms transition, on top of offering up specific SOE projects.