Money Matters

China state enterprise reform really means tighter party control

PUBLISHED : Friday, 30 October, 2015, 3:49pm
UPDATED : Friday, 30 October, 2015, 3:49pm

Forget what you read in the Thirteen Five Year Plan on reforming the state owned enterprises into market animals led by career managers. The reality is in a juicy piece delivered by an insider in September.

The 9,000-word speech of Xu Aisheng, a little known discipline inspection officer of the country’s shipping giant, COSCO group, was posted online this week.

Was the speech authentic? State censor removed it within two hours.

It revealed a “reform” that will make state companies more party-led instead. Here are his telling excerpts.

“We all know Cosco and China Shipping Group will be merged. A week ago, the chairmen of the two corporations held a meeting to present a so-called merger proposal which they have spent a month to prepare. I was there.

“I asked (Cosco Chairman) Ma Zehua: “Did you two remember your role while drafting the proposal? You are the party secretary!

“’In your proposal, there is not a single word on the strengthening of party leadership... What kind of reform is that? For a party secretary, this is a serious negligence. You should do a self criticism on this.’

“Then, (Cosco President) Li Yupeng said never ever has the company’s party meeting been like that with someone openly criticising the party secretary. I said: ‘That’s the new normal. If this happened again, I will report it immediately to the Central Commission for Discipline Inspection.’

“I told Ma he must make a prompt correction or I would exercise my power. I asked Ma if he agreed with me. Ma said: ‘I sincerely accept Xu’s criticism.’.”

This is about the merger of two companies which have been churning tens of billion in yuan losses for years. Yet, Xu is not a hot-head.

He was speaking within days of the Party issuing a directive that said its ruling must be strengthened in every state firm reform.

While the reform is supposed to make SOEs board-run, the directive demanded - for the first time in history – the party’s power and role be enshrined in every firm’s article of association.

While the reform is supposed to bring in career managers, the directive said qualified party people should get into the board and management.

Only then will state firms be run by people who know not only business but “have the party in their hearts”.

After Xu’s criticism, Cosco said it would set up a system to get discipline people involved at the early stage of any key personnel appointment.

“All the ills (in Cosco is) rooted in its weak party ruling....On my first day of reporting duty, I asked for a party flag. I waited for a week. The President Office said it was not easy to get. I was really angry.

This is the country of the Communist Party and there is no party flag! That is nonsense.

I gave my driver 400 yuan and the flag was there within half an hour. I marched into the President’s Office with the flag...See how bad it has been.”

What is strong party ruling? A work schedule set by Xu is like this.

In June, discipline people dug up six problems in Cosco. It has hired 21,867 agents many of which were linked to the management. It spent 4.5 million yuan on golfing over three years.

In August, the company reported on what it would do. In September, the company reported on how it has been doing.

In October, party committees of the headquarters and subsidiaries held “democratic sessions”. In party glossary, they are for “criticism and self criticism”. Reports are to be filed within 10 days.

In mid November, another review on how it has been doing on what it has promised to do. More reports.

“Don’t say that corporate should be treated differently for efficiency sake... There should be no discrepancy when it comes to the party’s ruling.”