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Jun Mai

Celine Ge

The State Council has changed tack with its plans to overhaul state-owned enterprises, taking a more conservative line in Sunday's blueprint on introducing private capital than it touted two years ago.
Analysts say that shift is the result of unsuccessful reform experiments hindered by reluctant SOEs.
The document released on the weekend called for fostering "mixed-capital ownership" through private investment to rejuvenate inefficient state firms.
It said changes in capital structure would be pursued "gradually" but did not set any specific deadlines.
The wording of the statement was a step back from the call at the Communist Party's plenum in late 2013, which stressed the need to foster a mixed-capital structure in the firms "in a proactive way", a term that was later toned down to "in an orderly fashion" in the annual government work report in March.
Read more: China wants to see results from reform of state firms by 2020
A lead researcher at a private think tank said the backtrack followed a series of unsuccessful attempts to overhaul SOEs.
"State firms are still very cautious about ownership and they don't feel they should involve private companies," the researcher said.
"Private companies that took part in the experiment were also marginalised."
The State-owned Assets Supervision and Administration Commission announced in July last year that two SOEs would experiment with mixed-capital ownership.
By August this year, 22 provinces had announced similar plans at the local level.
But most of those efforts did not succeed, the researcher said.
"The root of the problem was the overemphasis on the security of state assets … They worried about the potential loss of state assets even if the stocks rose after being sold."
The root of the problem was the overemphasis on the security of state assets 
Think Tank researcher
Zhang Chunxiao, a researcher at Beijing's Chinese Academy of Governance, said the painful lessons of the SOE reforms in the 1990s also hung over the reforms, raising fears that assets could be siphoned off through corruption.
"Some officials, out of their own interest … sold national assets at low prices - even giving them away for free - causing great losses [in the 1990s]," China Business News quoted Zhang as saying.
Sheng Hong, director of Beijing-based think tank Unirule Institute of Economics, said the plan announced on Sunday stopped short of introducing competition, which was supposedly the most important part of SOE reform.
"We can tell that vested interest groups are unwilling to reform and they are too strong," Sheng said.
Strengthening the party's role in the firms was not the solution either, because most SOE officials who turned out to be corrupt and incompetent were appointed by the party, Sheng added.

BNY Mellon strategist Simon Cox said the progress of economic reforms pledged by Beijing in 2013 had so far fallen short of people's hopes.
Those reforms might have lost their shine in the eyes of the leadership as it tried to tighten its iron grip on power through campaigns like the ongoing graft clampdown, he said.
"Xi's focus on reforms seems less than laser-like," Cox said.
"Maybe once party-building efforts reached the level of his satisfaction, he will return to reforms towards the end of the decade."
Additional reporting by Celine Ge


Beijing takes more conservative tack in reform of China's state firms

A worker cycles inside China National Petroleum Corporation  Lanzhou Chemical Industry Company in Lanzhou. The government says  changes in SOEs' capital structure would be pursued "gradually". Photo: Reuters 

The government has called for mixed-capital ownership through private investment to rejuvenate inefficient state firms. Photo: Xinhua

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Failed reform experiments force more conservative approach to letting private capital play a role in state-owned enterprises, analysts say


Beijing takes more conservative tack in reform of China's state firms

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Failed reform experiments force more conservative approach to letting private capital play a role in state-owned enterprises, analysts say

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}.css-jfmysa{display:inline;word-break:break-word;}.css-1ankfgb{cursor:pointer;display:inline;word-break:break-word;}Read more: China wants to see results from reform of state firms by 2020

Failed reform experiments force more conservative approach to letting private capital play a role in state-owned enterprises, analysts say

Read more: China wants to see results from reform of state firms by 2020