The State Council released ‘Implementation plan for SOE corporate and institutional reform’ on 26 July 2017, pledging to complete the reform by 2017 and achieve critical success by 2020, notes Experts suggest that the establishment of a modern corporate governance system is essential to the success of ongoing SOE reform, note Chen Qingtai 陈清泰 Chinese People’s Political Consultative Conference (CPPCC) standing committee member and Gao Minghua 高明华 Beijing Normal University professor.

The shift from ‘managing enterprises’ to ‘managing capital and assets’ provides impetus for SOE reform, argues Chen. A conundrum facing SOE reform is how to separate government from enterprises, as well as the ownership rights from corporate management. To make SOE reforms truly effective, the government ought to turn its ownership of enterprises into shares, which are managed by professional investment and operation agencies. After capitalisation and securitisation of state-owned assets, the convoluted bond between government and SOEs will break, allowing the government to deal with the market in a more impartial manner, says Chen.

The pathway towards a more inclusive decision-making process in SOEs is to establish a mature corporate governance system, especially in terms of diversified shareholding structures and marketised professional managers, says Gao. If the voice of private investors cannot be heard in the board of directors, true mixed-ownership reform will not succeed. SOE reform should move beyond the current structure, where the chairman of the board decides everything, and should create a corporate governance mechanism allowing the board of directors to set strategic objectives with a general manager given freedom to implement them, adds Gao.