Put brakes on nationalisation, academic urges

PUBLISHED : Thursday, 25 February, 2010, 12:00am
UPDATED : Thursday, 25 February, 2010, 12:00am

An outspoken economics professor is calling on the National People's Congress to reverse a trend towards nationalisation and support continued privatisation, which he says has been pushed aside.

In an open letter to the mainland's top legislature, which begins its annual session next week, Beijing Institute of Technology professor Hu Xingdou said lawmakers should call off state-owned enterprise mergers and the restructuring of private businesses, which have been taking place in the past few years.

Instead, the NPC should follow the route begun by the 14th and 15th Communist Party congresses in the 1990s, which strongly supported privatisation, Hu said.

'We should implement the decision made in 1999, which suggested that state-owned enterprises withdraw from many industries and leave space for privatisation,' Hu said in the letter, whose contents were released at the weekend.

He also called for regulations to open more markets to the private sector, as the State Council recommended in 2005.

According to his research, state-owned enterprises' assets had significantly increased to 42.5 trillion yuan (HK$48.4 trillion) in 2008 and would reach nearly 100 trillion yuan this year.

Such aggressive expansion was pushing private businesses into the corner, he said.

In industries from iron and steel, coal and aviation to finance, security, insurance and property development, many private businesses had been defeated or acquired by state-owned giants, Hu said.

'Private companies have been wiped out of the aviation industry and expressway construction projects in the Yangtze River Delta,' he said, citing two examples.

He urged lawmakers to define clear boundaries for state-owned enterprises and punish those that crossed the line.

He said he would send the letter to the NPC Standing Committee before the opening of the annual session and believed more private business delegates would raise the same issue during the meetings.

Although mainland scholars have been appealing to the central government to pay attention to the impact of nationalisation for some time, they were not making much headway.

'That is why I want to send the letter directly to the NPC during the annual meeting,' he said.

Many other scholars and economists agree with Hu that the market, not the government, should play the key role in economic development. They have warned that this return to nationalisation in response to the global financial crisis might hurt the country in just a couple of years.

A Beijing scholar known as Qiu Feng said similar returns to nationalisation had taken place 'two to three times since 1978, which reflects how weak the so-called market economy reform is'.

State-owned giants were the main beneficiaries of Beijing's policies of huge investments in construction projects and a loose monetary policy. But he pointed out, once the government unwinds these policies, the state-owned companies would lose their competitive edge quickly.

'Then, if the government does nothing to stop the [nationalisation] trend as soon as possible, the future decline of state-owned giants will severely hurt our economy ... just like what happened before,' he warned.

Qiu said it was hard to estimate the effectiveness of Hu's letter, but he believed officials would have to pay attention to it because of the publicity it had received.