Sasac report glosses over hostility towards SOEs

PUBLISHED : Saturday, 05 September, 2009, 12:00am
UPDATED : Saturday, 05 September, 2009, 12:00am

Annual reports tend to be dry. But not the one released by the State-owned Assets Supervision and Administration Commission (Sasac) on Thursday.

It is full of pictures - photographs of technicians climbing power towers damaged by snow storms; workers carrying communications equipment suspended from bamboo poles on their shoulders as they trudge through deep snow; blue-collar workers rushing a colleague on a makeshift stretcher to a plane in an earthquake-battered town, and fireworks depicting the Olympic rings at the Bird's Nest Stadium in Beijing.

It is also full of stories - tales of snowbound workers setting foot for the first time on luxurious pleasure boats sent by the Sinotrans Group to bring them home; pigs being imported and sold at half price by Cofco Corp to ensure storm-hit families could enjoy a New Year feast; the Three Gorges Project Corp increasing water outflows to ensure smooth traffic downstream so that more coal could be delivered...

More than 2,500 workers from China Railway Group risking their lives to get earthquake-twisted track in Sichuan back to normal within 15 hours; 14 helicopters from the CNOOC group heading for the ruined towns instead of offshore oil platforms; Air China, China Eastern Airlines Corp and China Southern Airlines saving 19,000 people from the ruins with 592 extra flights...

The State Grid Corp of China boosting its capacity by 33 per cent at a cost of 23.9 billion yuan (HK$27.12 billion) to ensure against blackouts during the Olympic Games; China Mobile, CNOOC and four other companies guaranteeing jobs for members of the Olympic Organising Committee after the games.

These are not the sort of things you will find in the reports of other state asset management arms.

But for Sasac's first-ever report, the social contributions of state-owned enterprises not only took up half of the 96-page document, but was in fact the core message.

'Central state-owned enterprises have fulfilled their social responsibilities as the elder sons of the country... Whenever there are disasters, the central state-owned enterprises are there to help at all costs and with no conditions... We are proven to be kaodezhu (reliable), xindeguo (trustworthy), ladedong (obedient), dadesheng (a winner),' reads chairman Li Rongrong's statement.

In a country where people learn to read the opposite into any official propaganda - in other words 'the condition is really bad if a government mouthpiece says it's excellent' - the report tells one thing: public hostility towards central state-owned enterprises is getting worse.

Consumers everywhere hate monopolies. It's true. But in the case of China, it's more than that.

SOEs used to be part of the country's 'welfare' system, in the sense that they provided guaranteed jobs as well as cheap products and services. Those responsibilities justified their privileges.

But that's not the case since the late 1990s. There have been massive lay-offs and price reforms in various sectors. In the eyes of the public, it is they who have paid for the corporate success, not the SOEs which continue to enjoy many privileges.

At the corporate level, the legacy remains of legally protected monopolies having unrivalled access to new share issues and placements as both issuer and investor. At the individual level, senior managerial jobs are largely beyond the reach of private citizens. To put it cruelly, you have no chance of becoming one of them.

The hatred is not difficult to understand. Criticising SOEs has become the fashion. In 2006-2007 when people were concerned about inflation, grandiose profits became the target. Two oil giants ended up issuing statements 'mitigating' their record profits. The result was a so-called 'excessive profits tax'.

Earlier this year when the financial crisis put Wall Street bankers' income in the spotlight, the executives of state banks who earn a few million yuan became the new target. Volunteer salary cuts and the silent death of many share option schemes was the answer.

Two months ago, as private entrepreneurs fought for tiny bits of the mega government stimulus left on the table by the SOEs, a picture of a giant chandelier at the lobby of a Sinopec office that was said to have cost 20 million yuan caused a furore. The rumoured cost was denied.

The latest incident involves 2 billion yuan worth of apartments bought by the country's largest oil producer CNPC. As property prices climb to new highs and with 70 per cent of prime land being pocketed by SOEs, the public is angry that the company was able to acquire some prime real estate at less than 40 per cent of the market rate. That story remains the top hit on major websites.

The hostility is not going to die down.

If the 2008 Sasac report is an unofficial admission of the problem, the move to open a press office in each central SOE is the official one. 'Unexpected news reports should be part of the risk management of a corporation,' it said.

With a regime that emphasises hexie shehui (harmonic society), this hostility matters - at least it becomes a good tool to be used in power struggles.

We are going to see more moves against the SOEs - the opening up of monopolised industries, cuts in tariffs, the introduction of salary caps and better financing access to the private sector.

Given their legacy, it would be unrealistic to expect these moves to cause the central SOEs to lose any real power. But a fair bet is that the high profit margins that many of them have been enjoying will become history, although the change will be slow.