Source: Internet

On 20 May, President Xi Jinping pointed out that, on one hand, we should accelerate the fundamental reforms of SOEs, taxation, and financing, and on the other hand, we have to propose the key measures for the reform as soon as possible.

On 18 May, Premier Li Keqiang convened executive meeting of the State Council, and during the meeting, the State Council deliberated and passed the Work Program on Intensifying the Reform of SOEs.

On 16 May, President Xi has made remark on the 13^th meeting of Central Leading Group on Financial and Economic Affairs that we should unswervingly promote the reform of SOEs and accelerate the transformation of government functions, and at the same time, we should also deepen fundamental reform on the fields of price, finance-taxation, finance, and social insurance.

The Chinese government has laid much stress on the issue of the reform of SOEs. In the next few years, the reforms on the following four fields would become the key task for promoting the reform of SOEs.

1.       Resolving inefficient Capacity

345 zombie SOEs should be dealt with within three years.

According to President Xi, the key point for the reform of the supply front is to promote the five tasks as follow: reducing capacity, reducing leverage, reducing inventory, reducing cost, and making up for short plank. For SOEs, reducing capacity is an important task.

At present, most of the SOEs are still facing the problems of redundant personnel and low efficiency. According to Premier Li, the country should hurry up in closing down inefficient production facilities like the coal industry and steel industry, and promoting the projects of reorganization, integration, and market clearing. The time table for reform has been settled: about 10% of the present capacity in steel and coal industry should be reduced.

Zhang Xiwu, deputy director of the State-owned Assets Supervision and Administration Commission (SASAC), declared that the SASAC had preliminarily planned to deal with the issue of 345 zombie enterprises within 3 years and reduce 10% of the capacity of steel and coal within two years.

The Chinese government would not only implement the market clearing on the zombie enterprises, according to SASAC, but also reorganize a batch of state-owned enterprises and optimize the structure of state-owned capital.

2.       Cut Down the Management Hierarchy

To cut down the management hierarchy of most enterprises to 3 to 4 levels

How many subsidiaries in a state-owned enterprise? This is a question that may confuse the CEO of the company. Premier Li commented on 18 May:” How could a company improve its management efficiency and competitiveness when even the CEO does not know the number of its subsidiaries?”

For some SOEs, the problem is not only limited in the redundant subsidiaries, but also in the management hierarchy. Among the central enterprises, there are 34 of them have about 5 to 9 levels in terms of hierarchy. “We have to be determined to solve this problem!” said Premier Li.

During 2016, the government would promote the process of cutting down the management hierarchy and do all it can to reduce the levels of the hierarchy to 3 to 4 and decrease about 20% of the legal entities within three years. “We have to further deepen the reform of the state-owned enterprises based on promoting the principle of advancing quality and efficiency,” said Premier Li.

3 . Strengthening and Optimizing the Major Industries

The central enterprises should work hard on the major industries that is vital to the national economy rather than compete with private enterprises

Some central enterprises are facing the problems that the enterprises have invested in too many side lines, according to the director of the Audit Administration on the executive meeting of the State Council on 18 May, and thus resulted in huge losses in subsidiary business.

On one hand, some central enterprises do exist some tricky problems that need to be dealt with; on the other hand, the restriction mechanism in the management of central enterprises is rather weak and therefore caused problems of the infinite expansion on the subsidiary business.

How to strengthen and optimize the major industries? It is necessary for the central government, first of all, to orderly exit subsidiary business; secondly, it should also take the total number of staff of the enterprises that suffered consecutive losses into control by carrying out the reform on personnel system according to the principle of “fixed personnel, fixed position, fixed arrangement”; finally, the central enterprises should pick up their pace on establishing a new income distribution mechanism in accordance with the demand of market economy.

4.  Accelerating the Transformation and Upgrading

Strive to achieve the earning of more than RMB 100 billion by reducing costs and increasing benefits, and implement the strategy of Made in China 2025

To reduce is to pursue a healthy development, while the healthy development of central enterprises depends on the innovation. The executive meeting of the State Council pointed out that the country should promote a healthy development by the means of innovation to boost the new economy.

Specifically speaking, we should integrate the action of “internet +” and the development strategy of big data to continually improve the level of industry and the competitiveness of the product. Furthermore, the government should encourage the SOEs to build up national demonstration base and professional innovation space, strive to make great breakthrough on key technology, and implement the strategy of Made in China 2025.

What’s more, the meeting also proposed specific requirement on the control and regulation on costs: strengthening the control and regulation on costs, reducing the accounts receivable, cutting down the scale of inventory and the scale of losses, declining debt levels, and achieving the earning of more than RMB 100 billion by reducing costs and increasing benefits.

*This article is edited and translated by CCM. The original article comes from People Daily.

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