By Zhang Yongwei, DRC

2016-12-28

Against the increased economic downward pressure, state-owned enterprises (SOEs) are confronted with a number of problems. The Central Economic Work Conference has set the task to deepen reform of SOEs and state-owned assets and address the main issues relating to SOEs’ reform through promoting mixed ownership reform and accelerating the building of a market-based operation mechanism.

First, typical cases of mixed ownership reform are still quite limited. The Central Economic Work Conference holds that after pushing forward mixed ownership reform with a new institutional mechanism, which is a hard nut to crack, it would be easier to deal with other problems relating to SOEs reform. The conference also required that pragmatic breakthroughs need to be made in seven strongly monopolized sectors.

Second, measures to ensure pragmatic breakthroughs made in mixed ownership reform are as follows. 1. Mixed ownership reform needs to be combined with the reform of different sectors based on clearly defined degrees of openness and open-up links. 2. Mixed ownership reform needs to be combined with reforms relating to other SOEs’ issues such as the cadre system, corporate structure governance and shareholders’ rights and interests. 3. Mixed ownership reform needs to be combined with supportive reforms, including clear regulations such as the accountability and the exemption of responsibility mechanisms.

Third, SOEs should possess the basic functions of market entities so as to play a leading role in the market. The Central Economic Work Conference has further clarified the nature of state-owned enterprise as market entities and proposed to build a flexible and efficient market mechanism. The government needs to manage the invested enterprises in the way of managing investment, through capitalization, the reform of mixed ownership, and listed companies on the capital market. The government also needs to establish an exit mechanism for those ill-fared enterprises to withdraw from the market.

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