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State sector reform will make market fairer, benefit people

Updated: Sep 16,2015 9:09 AM

China issued a guideline document on Sept 13 for further reform of State-owned enterprises (SOEs), which is said to be more “market-oriented” because it allows investment of non-State capital in more sectors and discourages government intervention in the running of the SOEs.


SOEs have long been blamed for unfair competition, because they monopolize key industries, form interest groups with government departments, and lobby local leaders to issue or maintain policies favorable to them. Therefore, the crucial aspect of the reform should be to prevent SOEs from using their political connections to seek economic gains. When their financing costs are the same as non-SOEs’ and they have to attract consumers with quality goods and services, market competition will be fairer and more people will benefit from the process., Sept 14

Instead of setting a clear timetable for this round of reform, the leadership has only said major achievements are expected by 2020. That’s a good move, because in the last round of reform in the 1990s that had a specific schedule, many regulations were implemented rather loosely, which created loopholes that were in turn exploited by some to make profit. By setting objectives instead of a schedule, the top leadership is more confident this time and in better control of the process.

Beijing News, Sept 15

SOEs do need reform. But the problem is how to prevent certain SOE executives from dividing the State assets among themselves in the name of marketization. The new guideline has made a breakthrough by introducing non-State investors and encouraging the establishment of modern management system in SOEs. This will help market forces supervise the process and prevent corruption. If it proves successful, SOEs will revitalize.

Beijing Times, Sept 14