Laws to govern privatisation sped up
Cary Huang in Beijing
Former State Council official says updated corporate regulations will ease the transition of big state-owned enterprises
The State Council is accelerating amendments to corporate law to prepare for when the central government gives up its direct control of state owned enterprises (SOEs).
Li Zhimin, a former chairman of the State Council's board of supervisors stationed in key state-owned enterprises, told the South China Morning Post that the amendments would enable SOEs to be governed by the legislature instead of government agencies.
'All problems related to the reform of state-owned enterprises will be dealt with by an amended and up-to-date corporate law,' said Mr Li, who is now a member of the Chinese People's Political Consultative Conference's economic committee.
The mainland now has 196 large SOEs, with assets worth 9.2 trillion yuan, that are directly under the central government's control through the State-owned Assets Supervision and Administration Commission (Sasac).
Mr Li said that while the State Council had assigned representatives to sit on the boards of SOEs to oversee their assets, the reforms would result in an end to the socialist practice of the government controlling and managing the businesses.
The central government was also considering inviting elite members of society to act as state firms' directors and members of their boards of supervisors, as foreign experience had shown this could help check internal corruption and malpractice, Mr Li said.
Sasac's first step is to speed up the pace of privatisation of SOEs. The central government was aiming to cut the number of large companies under its control to between 30 and 50, Mr Li said.
It was also attempting to relinquish control of smaller SOEs by reducing its stake in these conglomerates while aggressively introducing more foreign and domestic capital to build them into joint-stock companies.
Mr Li said one way to restructure these state-owned giants into joint-stock firms was to seek listings in overseas markets and turn them into corporations that operated according to international standards.
The mainland has a two-level supervision of SOEs. Large SOEs are under the direct supervision of the central government, while the rest come under local authorities.
Beijing has recently announced an end to the long-held state monopoly over the power, telecommunications, rail and civil aviation sectors as part of efforts to provide a level playing field for private entrepreneurs.
However, Mr Li said the central government would maintain a monopoly in some strategically important and sensitive industries such as military and space.
Authorities saw these sectors as related to state sovereignty and national security.
'Even free-market economies like those in Western European nations maintain a state monopoly in some industries,' he said.
Even though it would relinquish its direct control of business, Beijing would maintain stakes in the large SOEs.
'The government will still have a certain influence on the market through its stakes in big firms,' Mr Li said, adding the share could be bigger than that held by some European governments, which hold as little as 2 per cent of state firms.