SOE reform plan looks too broad to brush out problems

Updated: 2015-09-21 10:08

By ED Zhang(China Daily)

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This will involve dividing specialized capital investment companies and operational level companies; defining innovation in equity restructuring; remuneration and executive recruitment systems; performance measurement; and profit-sharing with the public (because the SOEs' starting funds are in theory financed by the people).

Some business commentators have pointed out, quite rightly, that the new SOE program is still an effort to balance the interests and political concerns of different authorities. Its implementation could, indeed, take years.

Nonetheless, having a central SOE reform program can be practically useful because, first of all, no SOE is supposed to run counter to the program. Top SOE executives will have to behave carefully, especially when the reform program is tied to the anti-graft campaign.

Gradually, large SOEs will sever parts of their monopoly interests and turn into publicly listed, independent companies with diverse shareholders.

At least, in the areas now without predominant influence from the SOEs, it would be hard for them to establish new monopolies.

More importantly, perhaps, the slow implementation of a centrally defined SOE reform will benefit the economy in an indirect, if not inadvertent, way.

It will create a larger and better-defined space for more private enterprises-which tend to grow much faster-to flourish in the next few years and form a larger share of the overall economy.

The author is editor-at-large of China Daily. Contact the writer at edzhang@chinadaily.com.cn.

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