China’s SOE reforms must encourage competition and provide subsidy transparency, state economist says

State firms are widely expected to play a bigger role with Communist Party leaders due to meet later this month to flesh out the policy for the new five-year plan

Huang Qunhui is advising the government on developing the 2021-25 plan in his role as the head of the Institute of Economics under the Chinese Academy of Social Sciences

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China’s state-owned industrial firms had combined gross assets of 210 trillion yuan (US$31 trillion) at the end of 2018, with their net assets after subtracting debt totalling 58.7 trillion yuan, government data showed. Photo: KazMunayGas

Published: 8:00pm, 9 Oct 2020Updated: 9:10pm, 9 Oct 2020

China needs to make substantial reforms to its army of state-owned enterprises (SOEs) by introducing more competition and building a government subsidy system that is transparent and in line with international best practices, according to a prominent state economist.

State firms are widely expected to play a bigger role in the “dual circulation” strategy introduced by President Xi Jinping in May, with Chinese Communist Party leaders due to meet later this month to start to flesh out the policy for the new five-year plan for 2021-25.

“We need to focus on adjusting the structure of state capital in the 14th five-year plan … and make substantial moves in pulling out of inefficient and noncore businesses and concentrating on key industries,” said Huang Qunhui, who is advising the government on developing the new five-year plan in his role as the head of the Institute of Economics under the Chinese Academy of Social Sciences.

Xi announced in May that the new so-called dual circulation strategy would focus more on the domestic market to allow China to survive and also grow in an increasingly unstable and hostile world.

The plan, however, has left many questions over the future of the private economy, and also raised scepticism from abroad, particularly from the United States and the European Union.

In sectors such as the power grid, telecoms, railways, petroleum and natural gas, we must fully open up business segments that are suitable for market competition

Huang Qunhui

“In sectors such as the power grid, telecoms, railways, petroleum and natural gas, we must fully open up business segments that are suitable for market competition,” added Huang, who is also a member of the national manufacturing strategy advisory committee, in an article published in the state-run Study Times on Wednesday.