News Analysis: SOEs Reform, Long Way Ahead

 

There is still a long way to go and more arduous tasks are lying ahead in the reforms of China's state-owned enterprises (SOEs), said NPC deputies attending the current session of the Ninth National People's Congress (NPC).

Months before the session opened in Beijing Monday, the Chinese government announced the success of the three-year SOE bail-out program.

But economists among NPC deputies deemed it only a stage achievement and the underlying problems have eluded solution.

China has to establish a modern corporate system, adjust and reorganize SOE distribution, accelerate the pace of technical transformation, remove structure-inherent obstacles, enhance their technical and institutional renovation capabilities and build up a social security system in order to consolidate what has been gained in the reform, they said.

Prominent economist Wu Shuqing noted that the attainment of the three-year bail-out program is more a result of intensive government input than the outcome of corporate behavior.

Figures from the National Bureau of Statistics show that by the end of 2000, 70 percent of the 6,599 big SOEs in manufacturing that reported red figures in 1997 had turned a profit, while all the 31 regions reported that their state-owned enterprises had stopped making losses and begun to make profits.

"Turning-around does not necessarily mean they would not relapse into trouble again in the future, still less a fundamental turn in their competitiveness and innovative capability," Wu said.

The fundamental goal of SOEs reform is to make the enterprises highly competitive on the market, he added.

The Chinese government is fully aware of the real situation with state-owned enterprises. In his report to the on-going NPC session, Premier Zhu Rongji stressed the necessity of further advancing SOEs reforms so that they will become true independent players in market competition.

"The key to the success of SOEs reforms lies to the removal of institutional obstacles," said NPC deputy Zhuang Yi, an official from the state-owned Beijing United Motor Vehicle and Motorcycle Manufacturing Company.

Zhuang said she deeply feels that SOEs has been deprived of their freedom in policy decision making. She cited the government requirement to apply for a new vehicle model before production, saying that market is a fleeting opportunity and when the approval is handed down, the market would have already been divided up."

Wen Shizhen, the Secretary of the Liaoning Provincial Party Committee called for solution to underlying problems.

Liaoning, an old industrial base of China, has made remarkable achievements in SOEs reforms over the last few years, he claimed, adding that withdrawing from certain industries to venture into other areas will remain an important guideline to future SOEs reforms.

"Enterprises should not only do their own development and research, but also apply achievements made by others by exploiting the strength of capital," NPC deputy Huang Qifan from Shanghai said.

The success of SOEs reform also lies in the settlement of the redundancies resulting from reforms and the establishment of a sound social security system.

It was learned that, starting from this year, the country is to carry out experiments in 100 cities in entrusting the management of retirees from enterprises to communities and redundancies will enter directly into the labor market.

Experts deem it the good first step for enterprises to march ahead worry-free.