Zhang Junkuo

The 15th Congress of the Chinese Communist Party explicitly pointed out that in order to adjust and improve the ownership structure of the Chinese economy, "it is imperative to carry out a strategic adjustment of the layout of the state-owned economy. The state-owned economy must occupy a dominant position in the important industries and key sectors that are vital to the national economy. In other areas, asset reorganization and structural adjustment may be carried out to strengthen the key sectors and improve the overall quality of the state-owned assets." "Under the precondition that with public ownership as the main-stay the state controls the lifeline of the national economy and the control and competitiveness of the state-owned economy is increased, a proper reduction of the proportion of the state-owned economy will not likely to weaken the socialist nature of our country." The strategic adjustment of the state-owned economy, which involves both advance and retreat, is a correct strategic principle of utmost importance put forward by the Party Central Committee after earnestly summing up the experience and lessons of the reforms in the past two decades.

Since the 15th Party Congress, some progress has been made in carrying out the strategic adjustment of the layout of the state-owned economy, especially in "freeing the small ones". But some constraints still exist in the adjustment of the layout of the large and medium-sized state-owned enterprises. Therefore, it is necessary to take further measures on the 'basis of a conscientious summary of the experience to ensure that this strategic measure of the Party Central Committee is implemented.

I. To fully understand the great significance of the strategic principles adopted by the 15th Congress and overcome the ideological barriers to the adjustment of the layout of the state-owned economy

The original layout of the state-owned economy was formed under the influence of the Soviet-style socialist theories, which regarded the socialist economy as a big factory directly planned and managed by the state. According to these theories, state ownership must occupy an absolutely dominant position in the entire national economy and, with the exception of some trades which involves mainly manual labor and can not be owned by the state, the higher the proportion of the state-owned economy is, the better. In the past two decades of reform, however, the erroneousness of these theories has become increasingly obvious, with the adoption of the market principles for the economy and with the development of the non-state economy. The 15th Party Congress clearly stated that the non-public economy is an important component of the socialist market economy, the forms in which public ownership is realized should be diversified. And, instead of in all the sectors, the state-owned economy should occupy a dominant position only in the important industries and key sectors that are of vital significance to the lifeline of the national economy. Therefore, the basic framework for economic system, with public ownership as the mainstay and various forms of ownership developing together, has been affirmed for the preliminary stage of socialism. This has charted a correct orientation for the adjustment of the layout of the state-owned economy.

Nevertheless, some people are still obsessed with the outdated concept that "state ownership is an advanced form of public ownership and a goal pursued by socialism". They do not fully realize the great significance of the decision made by the 15th Party Congress on the adjustment and improvement of the ownership structure. This concept impedes the smooth adjustment of the layout of the state-owned economy and therefore must be changed. The current situation is that on the one hand, the financial capacity of the state is unable to support the state-owned economy which covers a too wide spectrum and finds itself to be financially difficult in the areas where the state- owned economy must play its roles. On the other, the residents' savings grow year after year and, along with the other financial assets held by them, the total has reached eight trillion yuan, which is yet to be fully mobilized and utilized. In the past when the non-state economy was not allowed to grow in a large scale, all the productive undertakings required by the society had to be run by the state. As a result, the state- owned economy was too extensively distributed and covered a too wide spectrum. Thanks to the past two decades of reform and opening up, the non-state economy registered a vigorous growth, which now can replace or partially replace the roles of the state-owned economy in many industries and sectors. Under such circumstances, it is possible for the incremental inputs and stock assets of the state-owned economy to be pulled out of some industries and trades in a planned manner and flow to and strengthen the important industries and key sectors that are vital to the lifeline of the national economy. Thus, the state-owned capital and the non-state capital can replace and complement each other to increase China's overall national strength in a better and faster way.

Ⅱ. To further define the strategic position of the state-owned economy and the mode of control

At present, some people regard the adjustment of the layout of the state-owned economy as a passive expedient measure when the operations of the state-owned enterprises are in difficulty. They advocate, therefore, that those state-owned enterprises with poor efficiency and with little hope to survive can be sold, while those with good efficiency can stay on. Apparently, guided by this idea, the strategic adjustment, which involves both advance and retreat, can deviate from the correct orientation.

In order to carry out the strategic adjustment of the layout of the state-owned economy, we must correctly define the position of the state-owned economy by proceeding from its special functions in the socialist market economy. We must also define which are the important industries and key sectors that are vital to the lifeline of the national economy. Based on that, we can further define in which industries and sectors the state-owned economy should occupy a monopoly position, in which industries and sectors the state-owned economy must stay, and from which industries and sectors the state-owned economy can withdraw completely. Otherwise, driven by self-interest, every industry and sector will demand more input instead of partial or full retreat.

In a market economy, different forms of ownership have different merits and weaknesses. Generally speaking, under the property right system of the state-owned economy, the state-owned enterprises can not have a property right control as strong as that of the non-state economy. In addition, they also find it difficult to completely separate government functions from corporate management or to truly give enterprises the autonomy to operate and be responsible for their own profits and losses. Therefore, they lack the market adaptability characterized by the non-state economy. But the state-owned economy also has its own peculiar functions that can not be replaced by the non-state economy. They include the public good functions to meet the common demand of the residents, the functions to facilitate the implementation of the public policies of the state, the functions to safeguard state security and the functions to ensure the coordinated development of the national economy. In short, the state-owned economy can better survive and grow in the important industries and key sectors that are vital to the lifeline of the national economy. But usually it can not compete with the non-state economy in the generally competitive areas.

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