SASAC Targets Illegal Business and Investment Practices at China’s Big State-owned Enterprises

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China’s top authority for the state-owned enterprise (SOE) sector is launching a crackdown on illegal business and investment practices at the country’s biggest government-run concerns.

On 17 April, the State-owned Assets Supervision and Administration Commission (SASAC) issued a notice on the work in relation to holding central enterprises accountable for illegal business and investment in 2023.

“Some [central SOEs] remain unwilling, afraid, or unable to hold people accountable,” SASAC said. “Certain enterprises lack sufficient coordination with regard to supervision, need to strengthen their accountability results, and improve authority for supervision and accountability.”

The notice arrives after a push from SASAC in 2022 to promote an accountability system targeting illegal business and investment at central SOEs, as part of the completion of a three-year action plan for SOE reforms.

According to SASAC, these measures have “continuously improved the accountability system, and enhanced the precision and intensity of accountability.

“The concept of compliance has been effectively strengthened, providing strong support for promoting the high-quality development of central SOEs.

“However, it is also necessary to note that the accountability work of central SOEs has not been evenly performed.”

For this reason, SASAC has outlined a set of six “regulatory missions” for further reform of central SOEs in 2023, including:

  1. Strengthening the foundation for security and improving an authoritative and efficient accountability system. “All central enterprises should adhere to the ‘two consistent principles,’ compare and align themselves with the policies of state-owned enterprise reform, continuously develop a clear and effective accountability system for business and investment, and improve and use the accountability mechanism.”
  2. Strengthen the implementation of accountability and promote the continuous improvement of the precision and intensity of accountability. “Each central enterprise should make ‘investigating major cases, focusing on high-risk areas, and treating stubborn problems’ as the main direction of accountability work; firmly grasp and deal with clues as to violations, resolutely prevent the ‘broken window effect’, and effectively build a strong defence line to safeguard the security of state-owned assets.”
  3. Strengthen the synergies and comprehensive effectiveness of supervision and management. “Each central enterprise should strengthen the coordination and integration of accountability, business management, internal audits, and special governance; fully exert the role of accountability in deterrence and curbing, resolutely prevent the problem of ‘spinning wheels’ and repeated violations, and improve the effectiveness of joint prevention and control.”
  4. Strengthen the promotion of rectification and enhancement and play a role in preventing and resolving major risks. “Each central enterprise should pay attention to promoting rectification and enhancement through accountability, and link the investigation and handling of violations, improvement of internal control systems, and standardized management enhancement. They should enhance the ability to prevent and resolve major risks from the perspective of institutional mechanisms.”
  5. Ensure smooth communication channels and continue to implement information-based supervision and accountability. “Each central enterprise should pay attention to the supporting role of information technology in accountability work, establish and employ sound supervision and accountability information systems, and use the information system as the basis for communication channels.”
  6. Strengthen the capabilities of accountability teams and continuously improve their quality. “Each central enterprise should place great importance on the development of accountability teams, adopt effective measures, and build supervisory teams that are politically strong, professionally competent, with a solid work style and strict discipline.”