Three decades of SOE reform:no pain,no gain

What lies ahead for China,difficulties or perhaps another three decades of glory? To address this question,a special event was held at Chongqing Technology and Business University:Symposium on Theories on and Reality of China’s 30 Years of Enterprise Reform and Development,annual meeting of the Chinese Institute of Business Administration for 2008. At the foot of a mountain just south of Chongqing,150 delegates in the field of economic research gathered for discussions on pains and gains of the 30 years of reform. Leading economists at the event included Chen Jiagui,vice president of Chinese Academy of Social Sciences (CASS),Zhang Guoyou,vice president of Peking University,and Jin Bei,deputy director of CASS’s Institute of Industrial Economics (IIE). The symposium was jointly sponsored by the Chinese Institute of Business Administration,Jiang Yiwei Academic Foundation for Enterprise Reform and Development,Chongqing Technology and Business University,and CASS Management Science Research Institute. The following is a group of articles written by staff reporters of the China Economist (CE).

A New Approach to China's SOE Reform and Governance

Over the past three decades since 1978,reform of China's SOEs has scored remarkable achievements after the three stages of decentralization,institutional innovation and state capital development.However,the reform at the current stage is confronted with complex situations and problems.Internationally,China's state sector is confronted with pressures from elevated national mandates and a stern international environment.Domestically,China's economic development urgently awaits transformation and changes are taking place in a factor-driven development environment familiar to SOEs.In terms of market-based operations,a great gap exists between the current conditions of the SOEs and the requirements of a sophisticated socialist market economic system.Under such circumstances,the state sector is responsible not only for appreciating the value of state assets but also for assuming the new mission of expediting the transformation of China's economic growth pattern,internationalization and the establishment of a sophisticated market economic system.These requirements mark a new milestone for SOE reform and development.Addressing the conflict between the profitability mandate and the public interest mandate is a key priority of SOE reform in the new era.This paper has approached SOE reform by dividing the state sector into three categories:SOEs that serve public policy,SOEs that serve specific functions,and general commercial SOEs,and creating different governance mechanisms for each type of SOEs.

SOE Reform: from Corporate System to Ownership System

China’s restructuring of state-owned enterpsies has been a major component of the country’s reform and opening, and a driver of its impressive economic growth of the last two decades. An examination of this restructuring is important not only as a contribution to the general economic development literature, but also for China to best understand how its development has played out so far, and thus how it might best be continued.

Challenges faced by SOE reform

State-owned enterprises’(SOE) greater independence from government offices as well as property rights reform have optimized SOEs’ shareholding structure. But the reform has to clear several hurdles before it can be fully realized. In 1998, the central government dismantled ministries that had been the direct administrators of large SOEs. Most functions of those ministries were transferred to industry associations. Only a few considered indispensable were taken over by other government offices. The move has pushed forward the SOE reform to some extent. On the other hand, being State-owned, those enterprises have to find new links with the government.

Free cash flow productivity among Chinese listed companies:A comparative study of SOEs and non-SOEs

This paper investigates the free cash flow productivity of SOEs compared with non-SOEs and examines its possible determinants.We find that SOEs have slightly weak free cash flow productivity but significantly stronger than non-SOEs.Similar performance exists among commercial class I and II SOEs and public-benefit SOEs.Further analyses suggest that firm size,age,sales growth,ownership concentration,government subsidies,and industry monopoly factors cannot explain this phenomenon.The common driver for all types of SOEs to generate stronger free cash flows than non-SOEs is their stronger expense control capability.