Column
PUBLISHED : Saturday, 10 November, 2012, 12:00am
UPDATED : Friday, 08 May, 2015, 9:46am

It is hard to give up all the joy that a monopoly brings

Hu Jintao has called for a wider distribution of the wealth generated by state-owned businesses but don't expect this to happen soon

 

Political bickering nowadays in China is all about interest, not about ideology. No interest can be more tangible than money. So don't be surprised to see a conservative-dominated leadership this week.

By conservative, I am not referring to the political left but agents of the political seniors who have benefited a lot from the existing system.

The money we are talking about here is based on monopolistic status; political plus economic dominance and the mammoth wealth enjoyed by the state-owned enterprises.

The difference between the rival camps is clearly spelt out in the reports to the party meeting by its chief, Hu Jintao, this Wednesday and predecessor Jiang Zemin in 2002.

Jiang said: "Public ownership is the core of our economy … we must grow the state-owned economy. Having the lifeline of our economy firmly in the hands of the state-owned sector is vital to the nation's security and economic strength."

True to his words, the SOEs have growing political and financial clout despite a declining economic contribution.

His pet project - the State-owned Assets Supervision and Administration Commission (Sasac) - has turned from a "supervisor" to a "protector" of SOEs.

In his report, Hu no longer called public ownership the core of the economy. Instead he said: "We must promote different forms of public ownership while shifting state capital into industries that are strategic to the national security and the economy. We should ensure equal access to resources, fair market competition and same legal protection to all corporates (regardless of their ownership)."

This translates into the opening up of non-strategic industry; sale of state stakes and higher dividend payout from state enterprises.

The cynics call this "wealth redistribution". Well, it's not about giving to the have-nots as the term normally means but a new cut among rival camps.

There are a lot of justifications though - the country needs higher efficiency to survive the low-growth future; more money to pay for better welfare support; and wealth reallocation (no matter how superficial) to stop the have-nots from rioting.

The public is on their side. They are angry with the fact that SOE staff contributes to a quarter of the economy's industrial output but gets half of the salary.

At the corporate level, the public sector paid only 2 per cent of their profit to the public coffers in 2010. That's a drop of 49 per cent despite a 37.9 per cent profit growth.

Yet, behind every major state-owned enterprise is a politburo standing committee member. After all, these enterprises are controlling mammoth amounts of cash and dishing out billions of dollars of contracts every year.

If political reform is about the change in power, this shaking up of the state-owned sector is about a change in who holds the real money. So much is at stake that the difference has been played out in public with the reformists resorting to external pressure in recent months.

This February, with the blessing of the premier-designate Li Keqiang, the World Bank issued a report calling for the breaking up of monopolies and higher dividend payouts from the SOEs.

A so-called independent researcher interrupted a press conference on the report with slogans and leaflets that denounced the proposals as "poison". That is unheard of in Beijing where "dissidents" are netted and hidden away days before any important occasion.

A media report then said the Sasac has refused to sign the report though it has the blessing of premier designate Li. It said the commission called it a "breach of the constitution" and "an attempt to topple Chinese socialism". The report has not been refuted so far.

In May, a clause appeared in the declaration of the Sino-US strategic talks that said China has committed to an increase in the dividend payout ratio of state-owned enterprises. Well, when does dividend payout ratio become a foreign issue?

Later that month, the Sasac issued a directive to encourage private investment in state companies. That happened after some table banging at the top.

This month, Sasac chairman Wang Yong told the legislature that "more industries may be opened up if conditions allow".

If that is what you are seeing in the public, think about the bickering behind the doors.

It is therefore unsurprising that the leadership line-up has taken an unusually long time to be agreed upon; that all the "political elderlies" have shown their faces in public in the past month; and that Hu's allies will be largely elbowed out.

shirley.yam@scmp.com

Share

 

Send to a friend

To forward this article using your default email client (e.g. Outlook), click here.

Enter multiple addresses separated by commas(,)

For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive