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在线翻译:
szdaily -> Opinion -> 
Rejuvenating State firms
    2015-08-17  08:53    Shenzhen Daily

    Wu Guangqiang

    jw368@163.com

    ON Aug. 10, Chinese shares shot up nearly 5 percent, with the benchmark Shanghai Composite Index up 184.22 points to 3,928.42 and the Shenzhen Composite Index jumping 4.49 percent, or 97.69 points, to 2,274.84.

    The surge was fueled by the anticipation of a broad overhaul of State-owned enterprises (SOEs), giving a shot in the arm to the weak stock market shattered by the mid-June slump triggered by concerns over China’s economic slowdown and the abrupt reduction of margin trading.

    According to the Hong Kong-based South China Morning Post, the State Council has approved a long-awaited blueprint to revamp SOEs and the central authority will unveil the architectural plan soon.

    Information from authoritative sources reveals that top-level SOE reform is near completion. The program will cover such areas as the introduction of mixed-ownership, employee stock ownership plans (ESOP), the responsibilities and accountability of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) and a restructuring of enterprises directly under the Central Government. Marketization-oriented SOE reforms will be accelerated in the second half of the year.

    Under the blueprint, two new “State-owned capital operating companies” will be set up and they will operate much like Temasek, an investment company owned by the Singaporean Government whose portfolio covers a broad spectrum of sectors. By any standard, Temasek is a successful company, enjoying high investment yield. As of March 31, 2015, Temasek’s net portfolio value was S$266 billion (US$190 billion), up S$43 billion from last year, and its one-year total shareholder return (TSR) was 19.20 percent.

    The shake-up will limit the role of the government to shareholders and supervisors instead of being involved in day-to-day business.

    SOE executives will be under greater pressure to ensure the success of investment and turning a profit.

    Of course, they will enjoy greater powers such as making more business decisions and boards of directors will be able to make manager-level hirings.

    China’s economic boom would have been impossible without successful SOEs, which morphed from affiliates of China’s previous command economy to independent commercial entities. The government has loosened its control over SOEs with the shedding of a large number of losing enterprises and significant restructuring of remaining enterprises, including allowing public listings. SOEs are now subject to greater market discipline, enjoy more autonomy and are more accountable for their performance.

    China’s State sector remains powerful; serving as an economic base for the nation, it continues to dominate many key areas of the economy, and it enjoys a unique competitive edge that privately owned enterprises (POEs) don’t have in areas such as equipment manufacturing and infrastructure construction.

    

    However, these achievements still fall short of making SOEs “modern enterprises,” an explicit goal set by the government in 1992 in which SOEs would become fully capable of making business decisions free of administrative interference. So far, the government retains considerable influence over SOEs through the exercise of its owner’s rights as well as multiple regulatory channels. SOEs have also become a strong vested interest in a system that treats them favorably.

    Many SOEs are plagued with overcapacity, vicious competition, low-efficiency, blind investment, over-staffing, corruption and waste. According to a recent survey, the productivity gap between State-owned and private companies has widened since the financial crisis of 2008, with an average return on assets for State entities at about 4.6 percent, compared with 9.1 percent for private companies.

    Further market-oriented SOE reforms will, therefore, be crucial if China hopes to achieve ongoing gains in productivity and to maintain a swift pace of economic development.

    The market response to the blueprint has been favorably enthusiastic — dozens of heavyweight SOEs surged to their daily trade limits after the Post report.

    (The author is an English tutor and freelance writer.)

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