All-round reform

MAIN POINTS ON REFORM AND OPENING UP FROM THE COMMUNIQUE RELEASED ON NOV 12, 2013

 

Much has come from the third plenum regarding the management of State-owned assets, particularly State-owned enterprises. The reforms are not going to wipe SOEs out of existence, however.

The communique said China's basic economic system is one that depends on public ownership as its main body but allows for the prosperity of various ownerships. Both public and nonpublic ownerships are important components, it said.

Regarding public ownership, represented mainly by SOEs, it said China will continue to strengthen their vigor, their power of self-control, and their influence. For nonpublic sector ownership, such as the millions of privately held small enterprises, the communique said China will provide ample room for their vitality and creativity.

In the meantime, it said, due protection will be provided to cover property rights, to develop a mixed economy (a mix of public and private ownership), to push for a modern enterprise system in SOEs, and to support the healthy development of nonpublic enterprises.

There are approximately 144,000 SOEs, employing 37 million people. They enjoy much more autonomy than in the era of the planned economy, but their supervision has proved inadequate on occasion. Current problems include the distribution of internal income and job-related executive expenditure. Experts say further market-oriented reform of SOEs will require the separation of asset administration from day-to-day management.

The third plenum communique did not mention the word monopoly once. However, one of the most frequently mentioned words was "market". It featured 22 times.

"Building a unified but open, orderly and competitive market system will guarantee the market plays a decisive role in the allocation of resources" in society, it said.

On this basis, autonomous management and fair competition can be made possible as well as consumers' free choice and the free flow of goods and services. A major effort is to be made toward this goal, and to knock down the internal barriers holding back progress in efficiency and fairness.

The leadership also called for the further liberation of people's minds and society's productivity by removing defects in all aspects of the system.

The process will be quickened in economic structural reform, to build a more efficient, equitable and more sustainable economy, the communique said.

A legacy of the old planned economy is that a number of industries are still dominated by large State-owned enterprises. Up to now, meaningful participation by non-State sector companies has been impossible.

The main monopolies are:

• Railway development and operations

• Petroleum and natural gas production, refining and trade

• The electricity grid and supply

• Telecommunications network service, and banking and other major financial services.

Hazards arising from the monopolies spill over into the areas of public interest, including corruption among high-level executives.