context: CEWC renewed its commitment to SOE reform, pledging to enhance the prominence of state-owned capital while mobilising various market actors. The seemingly paradoxical expression reflects consistent state conservatism on reconciling state-owned capital and private investments. The ‘authorised operation system’ (授权经营体制 ) intends to address this by partially delegating operation of SOEs to private investors or professional managers, while retaining state ownership.

Emphasising ‘authorised operation’, SOE reform in 2018 will focus on state-owned capital management, says Li Jin 李锦 China Enterprise Research Institute chief researcher. The authorised operation system allows gradual shift away from SOE management to state-owned capital supervision and preserving the value of public assets. 2018 Central Economic Work Conference (CEWC) proposes

  • improving state-owned capital reform and setting up authorised operation systems
  • transforming the role of state-owned asset supervision administration
  • fostering modern corporate and legal person governance
  • strengthening Party leadership

In the past, due to ambiguous classifications, all SOEs, including zombie enterprises and those with outdated capacity, were encouraged to expand their business. This outlook limits structural reform. In the next step, SOEs will be categorised internally and non-competitive ones are expected to be eliminated, suggests Li.

Liu Shengjun 刘胜军 Institute for China Finance Research president argues slow economic reform before 19th Party Congress was due to

  • significant political cost of the anti-corruption campaign
  • emphasis on short-term stability
  • dereliction of duties by public officials caused by devolution and anti-corruption

Favorable conditions for reform are emerging post-19th Party Congress, adds Liu, including

  • centralised authority
  • discarding hard GDP growth targets creates space for reform

Abandoning Party dogmatism will be key to resolving the inherent conflict between marketisation and state control. As the Party withdraws from business management to political and supervisory work, the market will conduce more efficient and profitable management of state-owned assets, says Liu.