Keep a watch on SOE reforms to avoid graft

Since State Owned Enterprise (SOE) mixed ownership reform involves huge wealth and assets, disciplinary, auditing and judicial authorities should fulfill their responsibilities to ensure public assets are not encroached upon by individuals, says an article in the 21st Century Business Herald.

Excerpts:

Two listed companies in China disclosed a mixed ownership reform plan of their parent state-run firm CITIC Guoan Group (CGG).

Because CGG’s largest stakeholder CITIC Group is not under supervision of the state-owned assets watchdog, and reform of CGG is either a trading of original equities or an increase of share and capitals from private investors, mixed ownership reform seems free from government supervision and need not disclose relevant information to the stock market.

State-owned enterprise reform in the 1990s caused a huge loss of public assets. Corruption cases exposed in some SOEs explains the urgency in reforming the bureaucratic management system and supervisory institutions.

Concern that corruption and loss of public assets will appear in this round of mixed ownership reform is well-founded given the lack of effective supervision and transparency.

China’s fight against corruption should not only focus on investigating a certain number of cases, but more importantly establishing a system to prevent corruption from occuring.

Information disclosure, the public’s involvement in supervision and an accountability risk-control system are all necessary. The government is duty-bound to watch over all reforms of SOEs and workers at SOEs should have channels and a say in the reform of their enterprises.