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5 White Paper on the Business Environment in China
President Xi’s name alone. With this, Mr. Rosen’s report notes, Li Keqiang era”, that the inclusion of private shareholders
the president “was asserting his power and intention to drive into Citic Group’s assets “will [also] at least improve its
economic change, rather than settle for a speed limit imposed transparency”. 19 e report noted many large SOEs including
by consensus. [President] Xi’s program set a hard date of 2020 China Mobile and Sinopec have listed in Hong Kong and
for completing a broad slate of reforms.” 15 New York over the past two decades as part of government-
designed [SOE] restructuring.19
e rst important element in the Decisions was a “revised
mission statement for government” with instructions for fo- By late August 2014, Mr. Rosen’s report notes, the State
cus on eight core objectives: Asset Supervision and Administration Commission (SASAC)
in Beijing was “broadening implementation of governance re-
1. Maintain macroeconomic stability forms at central SOEs, and more than 20 provinces had pub-
2. Strengthen and improve public services lished SOE reform plans that involved listing or selling o
3. Safeguard fair competition assets in up to 70% of provincial SOEs by 2017.” 15
4. Strengthen oversight of the market
5. Maintain market order On issues directly and speci cally relating to foreign
6. Promote sustainable development investors in China, however, it is noteworthy that the
7. Promote common prosperity Decisions is still unclear. While President Xi’s administration
8. Intervene in situations where market failure occurs15 is proposing to permit changes to SOE ownership structures,
it is not clear if foreign investors, with US$ 1.35 trillion in
In 2014, President Xi Jinping and his administration then operations in China, are allowed to buy out and restructure
followed through with bold reform measures in several aspects SOEs in the form of joint ventures. In addition, while the
of the Chinese economy, con rming, in Mr. Rosen’s opinion, Decisions promises due process and fair competition policy to
that “the Decisions was a starting point, not an empty text.”15 private Chinese rms with regards to operating against SOEs,
it is not clear if “private” also means “foreign private” rms.15
In June 2014, Communist Party leaders approved a top-
level national plan for deepening scal and tax reforms; speci- e US-China Business Council, in its latest Economic
fying reform priorities and tasks; and, boldly setting an interim Reform Scorecard, declares that “while China’s economic
deadline of 2016 for “basically” nishing major tasks. Finance reform plans have the potential to promote reform in ways
Minister Lou Jiwei elaborated on speci c implementation - that address market access barriers and operational challenges
emphasizing measures to reform budget management and of concern to foreign companies, these reforms have had only
improve the taxation system.15 Although Mr. Rosen stipulates a limited impact to date. “ e Scorecard goes further to state
that further clari cation is still required, the Decisions also that its main “areas to monitor for progress include revisions
touched on reform of China’s powerfully entrenched State- to China’s foreign investment laws, future reductions in the
Owned Enterprises (SOEs). ese reform goals include “dilu- SFTZ negative list, and stronger e orts to ease administrative
tion of state shareholding through the introduction of private approval burdens that impact foreign companies.”1
shareholders; extracting more pro t from SOEs to nance
public expenditures; specifying which industries legitimately Newsweek notes that it is precisely these SOEs, the state-
require state control; and making clear that when the state dominated sectors of the economy—banking, energy, tele-
remains a non-controlling shareholder in a competitive indus- communications, steel and autos, among others, which have
try, normal market competition should apply.” 15 greatly bene ted under the current economic model, and
which, and in many instances, may “ ercely resist meaningful
Among SOE reform e orts to date, Mr. Rosen’s report change.”2
observes that President Xi’s team has “successfully gone after
recalcitrant management at many of the most powerful SOEs, A year later, after the recent Fourth Plenum, Mr. Rosen
raised SOE dividend payouts to the government, cut execu- stresses the urgency of the need for reforms to continue, de-
tive compensation, and sent auditors to smoke out corruption claring in his report that “ e most promising early sign of
and special interest dealings.” 15 reform would be the release of a negative list explaining which
industries are meant to be protected from competition.” 15
In June 2014, shareholders in Hong Kong-listed Citic
Paci c recently approved a plan to buy the key operating On November 4, 2014, the Chinese government asked
assets, including stakes in Citic Securities and Citic Bank, of for suggestions from the public about the revised draft of
parent Citic Group for US$36 billion. China Economic Review the Catalogue for the Guidance of Industries for Foreign Invest-
hails this as “a landmark deal involving China’s rst SOE to ment. e draft substantially cuts restrictive items from 79 to
be run on market-like principles” which has been “heralded 35, further lifting the restriction of foreign investment shares,
as a blueprint for state enterprise reform in the Xi Jinping- cutting restrictions of “joint-venture/ cooperation” items from
43 to 11, and lifting items which had to be “controlled by Chi-
42 nese parties” items 44 to 32. e draft removes restrictions for
President Xi’s name alone. With this, Mr. Rosen’s report notes, Li Keqiang era”, that the inclusion of private shareholders
the president “was asserting his power and intention to drive into Citic Group’s assets “will [also] at least improve its
economic change, rather than settle for a speed limit imposed transparency”. 19 e report noted many large SOEs including
by consensus. [President] Xi’s program set a hard date of 2020 China Mobile and Sinopec have listed in Hong Kong and
for completing a broad slate of reforms.” 15 New York over the past two decades as part of government-
designed [SOE] restructuring.19
e rst important element in the Decisions was a “revised
mission statement for government” with instructions for fo- By late August 2014, Mr. Rosen’s report notes, the State
cus on eight core objectives: Asset Supervision and Administration Commission (SASAC)
in Beijing was “broadening implementation of governance re-
1. Maintain macroeconomic stability forms at central SOEs, and more than 20 provinces had pub-
2. Strengthen and improve public services lished SOE reform plans that involved listing or selling o
3. Safeguard fair competition assets in up to 70% of provincial SOEs by 2017.” 15
4. Strengthen oversight of the market
5. Maintain market order On issues directly and speci cally relating to foreign
6. Promote sustainable development investors in China, however, it is noteworthy that the
7. Promote common prosperity Decisions is still unclear. While President Xi’s administration
8. Intervene in situations where market failure occurs15 is proposing to permit changes to SOE ownership structures,
it is not clear if foreign investors, with US$ 1.35 trillion in
In 2014, President Xi Jinping and his administration then operations in China, are allowed to buy out and restructure
followed through with bold reform measures in several aspects SOEs in the form of joint ventures. In addition, while the
of the Chinese economy, con rming, in Mr. Rosen’s opinion, Decisions promises due process and fair competition policy to
that “the Decisions was a starting point, not an empty text.”15 private Chinese rms with regards to operating against SOEs,
it is not clear if “private” also means “foreign private” rms.15
In June 2014, Communist Party leaders approved a top-
level national plan for deepening scal and tax reforms; speci- e US-China Business Council, in its latest Economic
fying reform priorities and tasks; and, boldly setting an interim Reform Scorecard, declares that “while China’s economic
deadline of 2016 for “basically” nishing major tasks. Finance reform plans have the potential to promote reform in ways
Minister Lou Jiwei elaborated on speci c implementation - that address market access barriers and operational challenges
emphasizing measures to reform budget management and of concern to foreign companies, these reforms have had only
improve the taxation system.15 Although Mr. Rosen stipulates a limited impact to date. “ e Scorecard goes further to state
that further clari cation is still required, the Decisions also that its main “areas to monitor for progress include revisions
touched on reform of China’s powerfully entrenched State- to China’s foreign investment laws, future reductions in the
Owned Enterprises (SOEs). ese reform goals include “dilu- SFTZ negative list, and stronger e orts to ease administrative
tion of state shareholding through the introduction of private approval burdens that impact foreign companies.”1
shareholders; extracting more pro t from SOEs to nance
public expenditures; specifying which industries legitimately Newsweek notes that it is precisely these SOEs, the state-
require state control; and making clear that when the state dominated sectors of the economy—banking, energy, tele-
remains a non-controlling shareholder in a competitive indus- communications, steel and autos, among others, which have
try, normal market competition should apply.” 15 greatly bene ted under the current economic model, and
which, and in many instances, may “ ercely resist meaningful
Among SOE reform e orts to date, Mr. Rosen’s report change.”2
observes that President Xi’s team has “successfully gone after
recalcitrant management at many of the most powerful SOEs, A year later, after the recent Fourth Plenum, Mr. Rosen
raised SOE dividend payouts to the government, cut execu- stresses the urgency of the need for reforms to continue, de-
tive compensation, and sent auditors to smoke out corruption claring in his report that “ e most promising early sign of
and special interest dealings.” 15 reform would be the release of a negative list explaining which
industries are meant to be protected from competition.” 15
In June 2014, shareholders in Hong Kong-listed Citic
Paci c recently approved a plan to buy the key operating On November 4, 2014, the Chinese government asked
assets, including stakes in Citic Securities and Citic Bank, of for suggestions from the public about the revised draft of
parent Citic Group for US$36 billion. China Economic Review the Catalogue for the Guidance of Industries for Foreign Invest-
hails this as “a landmark deal involving China’s rst SOE to ment. e draft substantially cuts restrictive items from 79 to
be run on market-like principles” which has been “heralded 35, further lifting the restriction of foreign investment shares,
as a blueprint for state enterprise reform in the Xi Jinping- cutting restrictions of “joint-venture/ cooperation” items from
43 to 11, and lifting items which had to be “controlled by Chi-
42 nese parties” items 44 to 32. e draft removes restrictions for
