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China classifies state firms for targeted reforms

Updated: Dec 29,2015 8:53 PM     Xinhua

China on Dec 29 unveiled a guideline to divide the state-owned enterprises (SOEs) into strictly commercial entities and those that serve governmental ends, such as power and healthcare suppliers.

The guideline, published by the Ministry of Finance, the National Development and Reform Commission and the State-owned Assets Supervision and Administration Commission (SASAC), follows a blueprint issued in September. The blueprint promised to modernize SOEs, improve management of state assets and promote mixed ownership.

“One-size-fit-all reforms are less effective than targeted reforms that are tailored on the basis of SOE classification,” a SASAC official told Xinhua.

According to the guideline, mixed-ownership is encouraged in both kinds of SOEs to reduce the dominance of state companies and ensure better management.

Public feedback will have a bigger weighting when authorities assess the performance of SOEs that serve social purposes, while commercial SOEs will be mainly assessed by their competitiveness and profitability, according to the guideline.

The authorities also pledged to step back and leave more freedom for managers.

China has about 150,000 SOEs, which hold more than 100 trillion yuan ($15.7 trillion) in assets and employ over 30 million people. Many have become ossified by declining profitability due to a lack of competition. Some earned the nickname “zombie enterprises,” muddling along with government bailouts.

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