SOE overseer: SOEs need to modernize

By Wang Ke
0 CommentsPrint E-mail, March 14, 2011
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The head of China Reform Holdings, the state-owned corporation set up in December to integrate and restructure China's state-owned corporations, wants state-run companies to operate under modern business models.

Xie Qihua [Photo: / Wang Ke]

Only corporations with a modern business model can survive, Xie Qihua told China's lawmakers and advisers at the annual legislative conferences. She said new market challenges mean companies need to deepen reform measures.

China's state-owned corporations have many deep-seated problems left over from its Soviet-style planned economy. Companies produced on the government's orders, caring little about profits or productivity. This kind of mindset is now an "irrational corporate management structure" and is just one of the problems state-owned corporations face, Xie said.

Xie submitted a reform proposal earlier this year to modernize state-owned corporations. Key elements of her proposal stress scientific management, modern shareholding and investment analysis.

Xie defined a scientific management system as consisting of a modern corporate governance system, clear structure of responsibility and obligation, efficient management operation system and a loyal and talented crew. It also separates ownership from operation: a board of directors operates the company and entrusts the managerial powers to professionals.

"This is the right direction for China's state-owned corporations to go in," Xie said. "If you look at successful corporations, you can find all these elements."

Analysts say that many state-owned corporations are now seeking public listings as a means of restructuring, and it will soon become a major method of choice for such companies' reform.

Xie said she believes that state-owned corporations have the potential to go public at home and abroad. The listing will promote the company's development and expansion and help improve their business models efficiency, she said.

Xie said China Reform Holdings will invest in non-renewable resources and strategic emerging industries in the coming years, aligning with the goals of China's 12th Five-Year Plan. It also plans to speed up the integration of state-owned companies and a market-based platform to operate assets according to the State-Owned Assets Supervision and Administration Commission's upgraded allocations for state-owned corporations.

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