Beijing directs state firms to ‘perform like normal enterprises’ after trade partners’ complaints
The new guidelines – coming after criticism of China’s ‘market distortions’ by the US, EU and Japan – depart from a policy of making state behemoths ‘bigger and stronger’
Beijing has set fresh guidelines for state-owned enterprises (SOEs), a target of recent complaints by China’s major trading partners, by advising the companies to operate like normal business entities and to continue to cut excessive steel and coal production capacity.
The directives mark a departure for the government from a previous policy of making the state behemoths “bigger and stronger” in favour of a softer tone, just weeks after trade ministers from the US, EU and Japan – in an obvious swipe at China – jointly blamed SOEs for market distortions.
Vice-Premier Liu He, President Xi Jinping’s top economic aide, said at an SOE conference on Tuesday that it was “utterly important” to increase the vitality of state firms as “individual market players”.
In addition, the conference concluded it was necessary to respect the authority of SOEs’ boards of directors to make “significant decisions” pertaining to “personnel and compensation”.
The new guidelines do not directly challenge Beijing’s view that SOEs must play a vital role in the national economy and answer to the Communist Party.
However, new directives for SOEs governing their corporate governance structure, the protection of minority shareholder rights and management philosophy marked a shift by the government away from a policy of insisting that the Communist Party have a bigger role in running SOEs and that party loyalty be put ahead of profitability in SOE-related decision-making.