Viewpoint Focus: Chinese State-Own Enterprise Reform
   2012-04-10 20:59:02    CRIENGLISH.com      Web Editor: Li

Viewpoints Focus aims to introduce current topics of debate in China to the English-speaking world. This selection will display some representative views in the ongoing debates on Chinese political, social and economic issues. The following selected opinions do not reflect the views of CRIENGLISH.com 

 

 

Chinese State-Own Enterprise Reform

 

  

Having cooperated with China's Ministry of Finance and the Development Research Center of the State Council for 15 months, a World Bank report entitled "China in 2030" issued on February 28. The report prompted much debate on the topic of reforming the nation's state-owned enterprises (SOEs). It urged China to push further its SOE reform and reduce the proportion of SOEs in the national economy. However, during a World Bank press conference, someone claiming to be an independent scholar disrupted the event and openly criticized the report's proposal to privatize SOEs as "poison" from the United States.

 

Li Rongrong, former director of the State-owned Assets Supervision and Administration Commission of the State Council, also disagreed with the report's conclusion and said he was "not afraid of debating with the World Bank."

 

Reformists argue that the low efficiency and the policy privileges enjoyed by SOEs, especially those controlled by the central government which monopolize crucial economic resources, such as oil, transportation and telecommunications, not only squeeze the profit space of private companies and discourage innovation, but also increase the wealth gap among different industries. Opponents of the World Bank report worry that privatizing SOEs will be dangerous, citing examples of Russia and other developing countries to warn that privatization would lead to oligarchies and the monopoly of foreign enterprises. They also deny the claim that SOEs are low in terms of efficiency and lack innovation. Arguments of the both sides can be found in the following speeches and articles:

 

 

"SOEs Are the Main Obstacle to the Further Development of the Chinese Economy"

 

Zhang Weiying, Professor at Peking University's Guanghua School of Management at the China Development Forum 2012:

 

Speech in "China Development Forum 2012 China and the World: Macro-Stabilization and Economic Restructuring"

 

Zhang Weiying, Professor of Peking University's Guanghua School of Management makes the speech at the China Development Forum 2012 on March 17. [Photo: www. CE.cn]

 

I feel that real macroeconomic management should create a good institutional environment in which everybody is motivated to work hard and innovate and resources can flow into the most efficient departments.

 

In this sense, I think the best macroeconomic management is not policies to allow the government to spend money, but policies to ensure the government spends as little as possible. That is because I seldom see the government spend money efficiently. I think in the near future, China must do three important things well in economic reform.

 

The first is privatizing SOEs. It is hard to imagine, given the great proportion and important status of SOEs that China could ever become a real market economy. Actually, SOEs have become one of the main obstacles to the further development of the Chinese economy in the future.

 

This would not be difficult. It is just a question of political determination, not about any technical difficulty.

 

The second is privatizing the land. China possesses a great amount of property, but this property is not capital. It can be used, but it is not transferable. It cannot be mortgaged to finance startup businesses. The greatest part of this property is the land owned by the rural population.

 

The third is freeing up the financial system. We have a wrongful belief. We thought the 2008 financial crisis was due to the liberalization of finance. And this belief turned our policies in an opposite direction. That was not the truth. It is very important for China to turn finance into a market and not rely on the government to manage the economy.

 

What is important is to open the financial markets and give more people the right to establish financial institutions. It is only though this that our Chinese capital can be used well and our entrepreneurial spirits can be inspired.

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