Low efficiency of SOEs remains obstacle for economy: expert

Though China has made some progress in its reform of state companies, the low efficiency in the state sector remains an obstacle for China's economic boom.

The reorganization of the state sector in the national economy has become necessary and urgent, said Chen Qingtai, director with the Development Research Center of the State Council.

Since the late 1990s, the central government has made many breakthroughs in strategic adjustments of the state economy and strategic organization of the state sector. "Achievements have been made in adjusting layout of state sector, but there are still many problems left," said Chen at a forum on transformation of state companies held over the weekend.

He said in recent years state companies have lost their irreplaceable status in China's national economy. With the market-oriented development and China's fulfillment of its commitment to the World Trade Organization, industries that used to be monopolized by the state have opened to private and foreign investors.

The structure of competitors has changed in these industries, said Chen.

Government, financial institutions and companies also have a stronger drive for organization in the state sector, the expert said. Local governments are seeking ways out for state companies with bad performance and financial institutions face huge bad debts, most from the state sector. Meanwhile, private and foreign companies have grown stronger and desire expansion.

Debts left by state companies have caused economic and social conflicts in some places. Closings and bankruptcies of state companies have led to unemployment, non-performing loans, and social security gaps.

Source: Xinhua