China to Focus on State-owned Asset Reform in 2018
The Chinese government has signalled that it will step up reform of the country’s state-owned asset sector in the upcoming year, following widespread overhaul of state-owned enterprises in 2017.
Li Jin (李锦), a researcher from Renmin University’s State-owned Enterprise Reform and Development Centre, said that reform of state-owned asset management will be a focal point for the Chinese government in 2018.
“State-owned asset reform, with reform of the state-owned asset authorisation and management system as its primary objective, has been placed at the forefront,” said Li to Securities Daily.
“In the future capital management and reform of the state-owned asset authorisation and management system will lie at the core for further delegation and authorisation, so that ownership and management rights will be further divided.”
Fu Yifu (付一夫), a researcher with the Suning Financial Research Institute, said to Securities Daily that reform of authorisation and management system was undoubtedly the “priority of priorities”when it came to state-owned asset reforms, with Beijing intent upon establishing long-term mechanisms.
According to Fu the separation of politics and business with respect to state-owned enterprises is one of the biggest challenges that has yet to be resolved.
Fu said that SOE’s are still unable to function as independent market entities, with the government retaining ownership, management and allocation rights over the long-term, as well as interfering excessively in the management of companies and impacting their development.
“In order to resolve this problem, reform of the authorisation and management system must be a focal point,” said Fu.
According to Fu local state-owned asset supervision and administration commissions should be responsible for the transfer of state-owned equity in enterprises under their direct supervision, and the same principle should apply to central SOE’s and their subsidiaries.
The transfer of equity stakes in state-invested enterprises within certain stipulated benchmarks and scopes should be delegated to the state-invested enterprises themselves.
Another key area of reform will be the recruitment of senior executives, as well as performance assessments and remuneration management.
Fu calls for the Chinese government to make the senior management of SOE’s more market-oriented, by delegating the right to their appointment and dismissal to boards of directors alongside their performance evaluations.
Fu also advocates the complete cancellation of administrative rankings for the senior executives of SOE’s, with company boards permitted to “openly and truthfully” recruit management from the public, as well as provide market-oriented forms of remuneration.