Changing demands call for SOEs' reform

Over the last three decades, State-owned enterprises underpinned China's emergence as a global manufacturing powerhouse, by spearheading the infrastructure construction boom. In the process, they became dominant, especially in sectors such as telecommunications and power and key strategic areas like steel, coal and banking.

But the traditional single-sided markets where SOEs lead are now being disrupted by new technology companies like Alibaba and Tencent, which straddle multi-sided markets of production, logistics and distribution by using unified platforms that benefit from economies of scale. By creating platforms for consumers and small-scale producers - what is essentially public infrastructure - these companies have directly challenged the SOE business model.

New digital platforms respond quickly and efficiently to public needs. These businesses are more collaborative or sharing than the traditional business of manufacturing, allowing consumers and smaller start-ups to shape products and services, from design to distribution. Given China's population of 1.3 billion - a major competitive advantage in terms of innovation and purchasing power - these platforms can disrupt the incumbent one-sided market producers by offering superior scale, speed and convenience, including access to global markets.