Page 48 - 2017 White Paper
P. 48
7 White Paper on the Business Environment in China
The guidance was jointly issued by the Communist Even if partial privatization is widely used, experts
Party’s Central Committee and the State Council, China’s question whether it can succeed in fundamentally
cabinet, Xinhua said in its official Weibo microblog. No reshaping the state sector.
further details were given (Armstrong and Flaherty 2012).
Some analysts warn that as long as the party
“In the process of deepening reforms of state-owned maintains ultimate control, SOEs will never act as purely
enterprises, the leadership of the party can only be profit-seeking entities. The issue has never been an easy
strengthened, not weakened”, said Zhang Yi, who runs one for the Party leadership to pursue, given powerful
the State-Owned Assets Supervision and Administration vested interests in the existing SOE structure. So instead
Commission of the ruling State Council, in a statement. of unveiling something too radical, what they’ve outlined
instead is a five-year road map for modest reform (The
The step comes nearly two years after President Economist 2015).
Xi Jinping called for market forces to play a decisive
role in the better allocation of resources in the world’s “The guidelines suggest that by 2020, the goals
second-largest economy. The released master plan was in all the main reform areas should be accomplished,
a confusing mix of conservative and liberal elements. constituting a system that is more suitable to the nation’s
Analysts say the plan reflected political wrangling by rival socialist-market economy”, Xinhua notes. Echoing some
factions with sharply different views of how SOE reform of the language used by the country’s Central Bank when
should proceed (Erman and Ljunggren 2012). it allowed the Yuan to devalue, Xinhua notes that the
“SOE system should be more modernized and market-
“Non-public investment entities can participate in SOE oriented” (Wildau 2015).
restructurings, listings, capital raisings and enterprise
management through equity stake purchases, share The new guidelines, Xinhua reports, state that
subscriptions, convertible bonds, equity swaps and other the government will encourage SOEs to eventually
methods”, said the State Council (Armstrong and Flaherty “go public” though “no specific timetable will be set”.
2012). Additionally, “SOEs will also be allowed to experiment
with selling shares to their employees”. According to
Among the competing factions, liberals generally favor The Diplomat, these provisions hearken positively for
an emphasis on privatization, whereas conservatives longer-term structural SOE reform and appear to address
want to consolidate party control over SOEs and merge recommendations that foreign investors have proffered
them into even larger groups. for a few years now. China promised to create “stronger,
better and larger” SOEs through a far-reaching reform
The cabinet said China would pursue mixed program, which includes restructuring those that are
ownership in industries including electricity, oil and performing poorly and allowing some to close, but the
gas, telecommunications, military equipment and civil reform plan has been vague on these details (Wildau
aviation. It also said SOEs should introduce foreign 2015).
investment through joint ventures, restructuring,
mergers and acquisitions and offshore financing (Panda Skeptics may read the announcement of the new
2015). guidelines, particularly given their timing after China’s
summer of volatility, as an attempt to signal reform without
For SOE reform to make significant progress, much necessarily pursuing it. By issuing these guidelines, The
will depend on specific implementation. SOE executives Diplomat observes, the State Council could be sending
and their government patrons wield significant political investors another signal that it is taking structural reform
clout and are likely to resist efforts to loosen government seriously. For the skeptics, they’ll believe the sort of SOE
controls. The guidelines already cautioned that state reforms these guidelines promise when they see it. We
capital should maintain the“absolute controlling position” do hope that China will move toward implementation
in national security sectors, as well as natural resources sooner rather than later.
including water, grain, forests, oil and gas (Panda 2015).
48
The guidance was jointly issued by the Communist Even if partial privatization is widely used, experts
Party’s Central Committee and the State Council, China’s question whether it can succeed in fundamentally
cabinet, Xinhua said in its official Weibo microblog. No reshaping the state sector.
further details were given (Armstrong and Flaherty 2012).
Some analysts warn that as long as the party
“In the process of deepening reforms of state-owned maintains ultimate control, SOEs will never act as purely
enterprises, the leadership of the party can only be profit-seeking entities. The issue has never been an easy
strengthened, not weakened”, said Zhang Yi, who runs one for the Party leadership to pursue, given powerful
the State-Owned Assets Supervision and Administration vested interests in the existing SOE structure. So instead
Commission of the ruling State Council, in a statement. of unveiling something too radical, what they’ve outlined
instead is a five-year road map for modest reform (The
The step comes nearly two years after President Economist 2015).
Xi Jinping called for market forces to play a decisive
role in the better allocation of resources in the world’s “The guidelines suggest that by 2020, the goals
second-largest economy. The released master plan was in all the main reform areas should be accomplished,
a confusing mix of conservative and liberal elements. constituting a system that is more suitable to the nation’s
Analysts say the plan reflected political wrangling by rival socialist-market economy”, Xinhua notes. Echoing some
factions with sharply different views of how SOE reform of the language used by the country’s Central Bank when
should proceed (Erman and Ljunggren 2012). it allowed the Yuan to devalue, Xinhua notes that the
“SOE system should be more modernized and market-
“Non-public investment entities can participate in SOE oriented” (Wildau 2015).
restructurings, listings, capital raisings and enterprise
management through equity stake purchases, share The new guidelines, Xinhua reports, state that
subscriptions, convertible bonds, equity swaps and other the government will encourage SOEs to eventually
methods”, said the State Council (Armstrong and Flaherty “go public” though “no specific timetable will be set”.
2012). Additionally, “SOEs will also be allowed to experiment
with selling shares to their employees”. According to
Among the competing factions, liberals generally favor The Diplomat, these provisions hearken positively for
an emphasis on privatization, whereas conservatives longer-term structural SOE reform and appear to address
want to consolidate party control over SOEs and merge recommendations that foreign investors have proffered
them into even larger groups. for a few years now. China promised to create “stronger,
better and larger” SOEs through a far-reaching reform
The cabinet said China would pursue mixed program, which includes restructuring those that are
ownership in industries including electricity, oil and performing poorly and allowing some to close, but the
gas, telecommunications, military equipment and civil reform plan has been vague on these details (Wildau
aviation. It also said SOEs should introduce foreign 2015).
investment through joint ventures, restructuring,
mergers and acquisitions and offshore financing (Panda Skeptics may read the announcement of the new
2015). guidelines, particularly given their timing after China’s
summer of volatility, as an attempt to signal reform without
For SOE reform to make significant progress, much necessarily pursuing it. By issuing these guidelines, The
will depend on specific implementation. SOE executives Diplomat observes, the State Council could be sending
and their government patrons wield significant political investors another signal that it is taking structural reform
clout and are likely to resist efforts to loosen government seriously. For the skeptics, they’ll believe the sort of SOE
controls. The guidelines already cautioned that state reforms these guidelines promise when they see it. We
capital should maintain the“absolute controlling position” do hope that China will move toward implementation
in national security sectors, as well as natural resources sooner rather than later.
including water, grain, forests, oil and gas (Panda 2015).
48
