Business / Economy

SOEs urged to be market-oriented

By Ding Qingfen and Bao Chang (China Daily) Updated: 2012-11-10 07:39

China's State-owned enterprises should learn from private and foreign companies to be more "market-oriented", which is also the direction of the reform of SOEs, said Wang Yong, head of the State-owned Assets Supervision and Administration Commission.

"It is clear that being more market-oriented is what the SOE reforms should lead to," Wang, minister of the SASAC, said on the sidelines of the 18th National Congress of the Communist Party of China.

"We could learn from multinational companies and some privately owned companies at this point.

"We have ... to stand out among the market competition and create more benefits for employees and shareholders."

In his report to the 18th Party Congress on Thursday, President Hu Jintao reiterated the importance of transforming the economic growth model, pointing out that "deepening reforms" is the key to the change.

As part of the reforms, China should unwaveringly consolidate and develop the public sector of the economy, and deepen reforms of SOEs, said Hu.

Wang said the reform is all the more important as SOEs are facing more challenges due to domestic and overseas economic pressures.

"We have to continuously deepen the reforms. This could help us add vitality and enhance SOEs' influence," he said.

The eurozone debt crisis, which is spreading, has affected global demand and the global economy. China's economic growth has been decelerating during the past quarters due to shrinking global demand and tightening measures in the nation's property market.

By the end of 2011, China had 117 central SOEs which held assets worth 28 trillion yuan ($4.4 trillion). The nation's central SOEs are mainly in the energy, telecommunications, transportation and defense industries.

China's SOEs have long been blamed for dominating the market, and calls have been made for the central government to introduce reforms to break the SOEs' monopoly.

Wang said that as a major part of the reform, SOEs must shift their business model to a more market-oriented one.

"China's SOEs shoulder some responsibilities that should have been borne by local governments and society, and this has added to their operating costs and hurt their profits," he said.

There are many institutions, such as schools and hospitals, under the umbrella of SOEs in China. In addition, more than 16 million retirees are affiliated to SOEs.

Wang said that if the SOEs could eventually shed these responsibilities their operating performance would not be worse than other types of businesses.

Mismanagement is another problem that SOE reform should touch upon, he said.

Li Jin, chief researcher of the China Enterprises Research Institute , said: "We are glad to see that many SOEs attach importance to the reform and have started to streamline their business."

"But we cannot ignore the fact that it will take time to implement the reform as the majority of SOEs have multiple businesses."

Wang added that China's SOEs "need to seek business opportunities in various sectors worldwide".

But he said that SOEs "must make big contributions to the local people, community and economy. We have to be responsible corporations in foreign countries. "

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