State-owned enterprise reform likely to be modest, researcher suggests

A leading central government researcher has called for the overhaul of state-owned enterprises but avoided saying whether their special status should be scrapped altogether.

The comments were made in an article by Cheng Wei, of the State-owned Assets Supervision and Administration Commission, and posted on its website, indicating reform of the sector might be discussed at the third plenary session of the party's Central Committee next month.

Cheng suggested seven changes to state-owned enterprises (SOEs): shifting the division between government and business; modernising the company management system; adopting market-based recruitment to attract talent; reducing the SOEs' role in carrying out the government's economic agenda; nurturing incentives for innovation; building corporate branding; and turning some giant SOEs into multinationals.

Cheng, head of macroeconomic and strategy research at the commission's Research Centre, suggested the central government abandon its practice of making political hires for top executive positions, saying it hindered efforts to attract globally competitive talent. He said more independent directors should be appointed to SOEs' boards to supervise management.

The long-running question of whether state monopolies should be broken up gained new currency when the head of the state-ownedassets administration, Jiang Jiemin , was recently placed under investigation for alleged serious disciplinary violations. Jiang also served as the former chairman of state-owned China National Petroleum Corporation (CNPC).

Some economists say state monopolies' control of key economic sectors impedes growth and their markets should be thrown open to competition. However, reform has been slow mainly due to resistance from powerful vested interests.