A New Approach to China’s SOE Reform and Governance

Huang Qunhui  and Yu Jing
Institute of Industrial Economics, Chinese Academy of Social Sciences, Beijing, China

Abstract:  Over the past three decades since 1978, reform of China ’s SOEs has scored remarkable achievements after the three stages of decentralization, institutional innovation and state capital development. However, the reform at the current stage is confronted with complex situations and problems. Internationally, China’s state sector is confronted with pressures from elevated national mandates and a stern international environment. Domestically, China’s economic development urgently awaits transformation and changes are taking place in a factor-driven development environment familiar to SOEs. In terms of market-based operations, a great gap exists between the current conditions of the SOEs and the requirements of a sophisticated socialist market economic system. Under such circumstances, the state sector is responsible not only for appreciating the value of state assets but also for assuming the new mission of expediting the transformation of China’s economic growth pattern, internationalization and the establishment of a sophisticated market economic system. Theserequirements mark a new milestone for SOE reform and development. Addressing the conflict between the profitability mandate and the public interest mandate is a key priority of SOE reform in the new era. This paper has approached SOE reform by dividing the state sector into three categories: SOEs that serve public policy, SOEs that serve specific functions, and general commercial SOEs, and creating different governance mechanisms for each type of SOEs.
Keywords: state sector, SOE reform, classification, corporate mission

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