Chinese government sets timetable for reform of centrally-administered SOEs

BEIJING -- Closing down "zombie companies," properly helping the affected workers and trimming sideline businesses that impair the core competence of the centrally-administered state-owned enterprises (SOEs) are among the measures the government will introduce in the coming two to three years to deepen the reform of these important SOEs.

The decision was unveiled during an executive meeting of the State Council chaired by Premier Li Keqiang on Wednesday.

"Centrally-administered SOEs have played an indispensable role in China's social and economic development, and we should give them full credit in that regard," Li said. "Yet crucial problems exist with them, too. Now we must tackle them step by step, which is essentially deepening the SOE reform."

Most of the 106 centrally-administered SOEs in China operate in sectors that are crucial to the country's social and economic development, such as telecommunication and energy.

Major problems with the bloated centrally-administered SOEs include weakness in core business, too many sideline businesses, low efficiency and excessive layers of administration and management.

The excessive layers of hierarchy and redundance persisting in the centrally-administered SOEs are also part of the reasons why it has not been easy to push through the reform over the years.

Despite the difficulties, Li has reiterated on many occasions that the government resolves to carry out such reform, describing the determination as that of "a brave warrior cutting off his own hand to save his body," given that the reform will affect the interests of some people.

The Wednesday meeting decided that 345 "zombie companies," which are all subsidiaries of the 106 centrally-administered SOEs, will be reorganized or left to the market within three years.

Centrally-administered SOEs are required to reduce their management levels to less than three or four from the current five to nine, while cutting 20 percent of their subsidiary legal entities within three years.