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6 White Paper on the Business Environment in China
as profound. Either way, China’s new policy design, and its suc- raised SOE dividend payouts to the government, cut executive
cess or failure in achieving it, will have a major influence on the compensation, and sent auditors to smoke out corruption and
international economy and stability and security in Asia and special interest dealings.” 15
beyond.”15
In June 2014, shareholders in Hong Kong-listed Citic
The core document issued in November 2013 during the Pacific recently approved a plan to buy the key operating assets,
Communist Party’s Third Plenum of the CCP’s 18th Party including stakes in Citic Securities and Citic Bank, of parent
Congress, known as Decision of the Central Committee of the Citic Group for US$36 billion. China Economic Review hails
Communist Party of China on Some Major Issues Concerning this as “a landmark deal involving China’s first SOE to be run on
Comprehensively Deepening Reform, or simply the Decisions, market-like principles” which has been “heralded as a blueprint
was accompanied by personal Explanatory Notes under for state enterprise reform in the Xi Jinping-Li Keqiang era”, that
President Xi’s name alone. With this, Mr. Rosen’s report notes, the inclusion of private shareholders into Citic Group’s assets
the president “was asserting his power and intention to drive “will [also] at least improve its transparency”19. The report
economic change, rather than settle for a speed limit imposed noted many large SOEs including China Mobile and Sinopec
by consensus. [President] Xi’s program set a hard date of 2020 have listed in Hong Kong and New York over the past two
for completing a broad slate of reforms.” 15 decades as part of government-designed [SOE] restructuring.19
The first important element in the Decisions was a “revised By late August 2014, Mr. Rosen’s report notes, the State
mission statement for government” with instructions for focus Asset Supervision and Administration Commission (SASAC)
on eight core objectives: in Beijing was “broadening implementation of governance
reforms at central SOEs, and more than 20 provinces had
• Maintain macroeconomic stability
published SOE reform plans that involved listing or selling off
• Strengthen and improve public services
assets in up to 70 percent of provincial SOEs by 2017” 15.
• Safeguard fair competition
• Strengthen oversight of the market
On issues directly and specifically relating to foreign
• Maintain market order
investors in China, however, it is noteworthy that the Decisions
• Promote sustainable development
is still unclear. While President Xi’s administration is proposing
• Promote common prosperity
to permit changes to SOE ownership structures, it is not clear if
• Intervene in situations where market failure occurs15 foreign investors, with US$ 1.35 trillion in operations in China,
are allowed to buy out and restructure SOEs in the form of joint
In 2014, President Xi Jinping and his administration then ventures. In addition, while the Decisions promises due process
followed through with bold reform measures in several aspects and fair competition policy to private Chinese firms with
of the Chinese economy, confirming, in Mr. Rosen’s opinion, regards to operating against SOEs, it is not clear if “private” also
that “the Decisions was a starting point, not an empty text.”15 means “foreign private” firms15.
In June 2014, Communist Party leaders approved a top-lev- The US-China Business Council, in its latest Economic
el national plan for deepening fiscal and tax reforms; specify- Reform Scorecard, declares that “while China’s economic
ing reform priorities and tasks; and, boldly setting an interim reform plans have the potential to promote reform in ways
deadline of 2016 for “basically” finishing major tasks. Finance that address market access barriers and operational challenges
Minister Lou Jiwei elaborated on specific implementation - em- of concern to foreign companies, these reforms have had only
phasizing measures to reform budget management and improve a limited impact to date. “ The Scorecard goes further to state
the taxation system.15 Although Mr. Rosen stipulates that fur- that its main “areas to monitor for progress include revisions
ther clarification is still required, the Decisions also touched to China’s foreign investment laws, future reductions in the
on reform of China’s powerfully entrenched State-Owned SFTZ negative list, and stronger efforts to ease administrative
Enterprises (SOEs). These reform goals include “dilution of approval burdens that impact foreign companies.”1
state shareholding through the introduction of private share-
holders; extracting more profit from SOEs to finance public Newsweek notes that it is precisely these SOEs, the
expenditures; specifying which industries legitimately require state-dominated sectors of the economy—banking, energy,
state control; and making clear that when the state remains a telecommunications, steel and autos, among others, which have
non-controlling shareholder in a competitive industry, normal greatly benefited under the current economic model, and which,
market competition should apply.” 15 and in many instances, may “fiercely resist meaningful change”2.
Among SOE reform efforts to date, Mr. Rosen’s report ob- A year later, after the recent Fourth Plenum, Mr. Rosen
serves that President Xi’s team has “successfully gone after re- stresses the urgency of the need for reforms to continue,
calcitrant management at many of the most powerful SOEs, declaring in his report that “The most promising early sign of
reform would be the release of
a negative list explaining which
24 industries are meant to be protected from competition” 15.
as profound. Either way, China’s new policy design, and its suc- raised SOE dividend payouts to the government, cut executive
cess or failure in achieving it, will have a major influence on the compensation, and sent auditors to smoke out corruption and
international economy and stability and security in Asia and special interest dealings.” 15
beyond.”15
In June 2014, shareholders in Hong Kong-listed Citic
The core document issued in November 2013 during the Pacific recently approved a plan to buy the key operating assets,
Communist Party’s Third Plenum of the CCP’s 18th Party including stakes in Citic Securities and Citic Bank, of parent
Congress, known as Decision of the Central Committee of the Citic Group for US$36 billion. China Economic Review hails
Communist Party of China on Some Major Issues Concerning this as “a landmark deal involving China’s first SOE to be run on
Comprehensively Deepening Reform, or simply the Decisions, market-like principles” which has been “heralded as a blueprint
was accompanied by personal Explanatory Notes under for state enterprise reform in the Xi Jinping-Li Keqiang era”, that
President Xi’s name alone. With this, Mr. Rosen’s report notes, the inclusion of private shareholders into Citic Group’s assets
the president “was asserting his power and intention to drive “will [also] at least improve its transparency”19. The report
economic change, rather than settle for a speed limit imposed noted many large SOEs including China Mobile and Sinopec
by consensus. [President] Xi’s program set a hard date of 2020 have listed in Hong Kong and New York over the past two
for completing a broad slate of reforms.” 15 decades as part of government-designed [SOE] restructuring.19
The first important element in the Decisions was a “revised By late August 2014, Mr. Rosen’s report notes, the State
mission statement for government” with instructions for focus Asset Supervision and Administration Commission (SASAC)
on eight core objectives: in Beijing was “broadening implementation of governance
reforms at central SOEs, and more than 20 provinces had
• Maintain macroeconomic stability
published SOE reform plans that involved listing or selling off
• Strengthen and improve public services
assets in up to 70 percent of provincial SOEs by 2017” 15.
• Safeguard fair competition
• Strengthen oversight of the market
On issues directly and specifically relating to foreign
• Maintain market order
investors in China, however, it is noteworthy that the Decisions
• Promote sustainable development
is still unclear. While President Xi’s administration is proposing
• Promote common prosperity
to permit changes to SOE ownership structures, it is not clear if
• Intervene in situations where market failure occurs15 foreign investors, with US$ 1.35 trillion in operations in China,
are allowed to buy out and restructure SOEs in the form of joint
In 2014, President Xi Jinping and his administration then ventures. In addition, while the Decisions promises due process
followed through with bold reform measures in several aspects and fair competition policy to private Chinese firms with
of the Chinese economy, confirming, in Mr. Rosen’s opinion, regards to operating against SOEs, it is not clear if “private” also
that “the Decisions was a starting point, not an empty text.”15 means “foreign private” firms15.
In June 2014, Communist Party leaders approved a top-lev- The US-China Business Council, in its latest Economic
el national plan for deepening fiscal and tax reforms; specify- Reform Scorecard, declares that “while China’s economic
ing reform priorities and tasks; and, boldly setting an interim reform plans have the potential to promote reform in ways
deadline of 2016 for “basically” finishing major tasks. Finance that address market access barriers and operational challenges
Minister Lou Jiwei elaborated on specific implementation - em- of concern to foreign companies, these reforms have had only
phasizing measures to reform budget management and improve a limited impact to date. “ The Scorecard goes further to state
the taxation system.15 Although Mr. Rosen stipulates that fur- that its main “areas to monitor for progress include revisions
ther clarification is still required, the Decisions also touched to China’s foreign investment laws, future reductions in the
on reform of China’s powerfully entrenched State-Owned SFTZ negative list, and stronger efforts to ease administrative
Enterprises (SOEs). These reform goals include “dilution of approval burdens that impact foreign companies.”1
state shareholding through the introduction of private share-
holders; extracting more profit from SOEs to finance public Newsweek notes that it is precisely these SOEs, the
expenditures; specifying which industries legitimately require state-dominated sectors of the economy—banking, energy,
state control; and making clear that when the state remains a telecommunications, steel and autos, among others, which have
non-controlling shareholder in a competitive industry, normal greatly benefited under the current economic model, and which,
market competition should apply.” 15 and in many instances, may “fiercely resist meaningful change”2.
Among SOE reform efforts to date, Mr. Rosen’s report ob- A year later, after the recent Fourth Plenum, Mr. Rosen
serves that President Xi’s team has “successfully gone after re- stresses the urgency of the need for reforms to continue,
calcitrant management at many of the most powerful SOEs, declaring in his report that “The most promising early sign of
reform would be the release of
a negative list explaining which
24 industries are meant to be protected from competition” 15.
