context: Following the sprint for corporatisation by end 2017, the state is working on institutional arrangements facilitating state-owned capital management and a modern corporate system. However, these efforts would be ‘putting old wine in a new bottle’ if the system does not welcome transparency and inclusiveness. Although government will report state-owned assets to National People’s Congress (NPC), the state has great leeway to pick and choose published data. The state’s control over SOE senior management is not likely to relax even with the selection mechanism changing from appointment to nomination.

Starting in October 2018, State Council will report state-owned asset status to the NPC, a step forward in improving the state-owned asset supervision system. State-owned asset supervision and preservation are important parts of SOE reform, says Peng Huagang 彭华岗 State-owned Assets Supervision and Administration Commission (SASAC) spokesman, who identifies the following priorities

  • strengthening SOE supervision in core businesses, reformed areas, key operation procedures and key personnel
  • setting up supervision mechanisms for investor supervision, SASAC supervisory committee and SOE internal bodies

SASAC’s recent notice on 80 leadership changes in 11 central SOEs reflects another major change—senior management appointment rights are shifting from the government to SOEs’ boards of directors. This is viewed as a major step towards authorised operation system that intends to separate the state from SOE management, according to China Economic Daily. SASAC director Xiao Yaqing 肖亚庆 says 2018 reform priorities include

  • building and regulating the central SOE board of director system and improving its functions
  • embedding Party organs in corporate governance structure

In addition to management reforms, SOEs in 2018 will also focus on

  • strategic M&As in equipment manufacturing, coal, electricity, telecommunication, and petrochemicals
  • elimination of zombie enterprises based on
    • market principles and respecting rule of law
    • individually tailored policies
    • various approaches including M&A, management enhancement and elimination