Bold move paves way for profits, efficiency gains

Fujian province has played an exemplary role in promoting the reforms of local State-owned enterprises by cutting red tape and improving efficiency, as part of its efforts to boost high-quality development.

The story of State-owned enterprise reform in Fujian is a remarkable one.

Back in 1984, Huang Wenlin, an official then in charge of supervising the operations of SOEs, wrote a letter, with the signature of 55 company executives, to the top leader of the province, saying they wanted "their hands to be untied".

"Whether you performed well or poorly, the salary was the same. The workers lacked motivation to work," Huang said.

"The managers had responsibilities but no right to lead," Huang added, telling the People's Daily that the old pattern of SOEs hindered their development.

The letter said: "Managers should be nominated by companies themselves, who can promote and demote their executives. Companies should have the right to allocate their bonus funds. Companies should be allowed to sell their products."

The letter was published in newspapers at the local and national level, triggering hot debate among the public at a time when the government held the reins tight in terms of regulating SOEs. The central government then released a document guiding the reform of SOEs nationwide.

Fujian Energy Group, a local SOE, said the reform initiative has benefited and saved its four coal mining branches, once in serious trouble.

"In the past, we were the largest coal company in the region, but we realized the risk of relying on only one industry," recalled Lin Jinben, chairman and Party chief of the company.

In 2014, 80 percent of the company's mines reported total losses of 240 million yuan ($34.9 million).

"Reform is hard, but things will get even harder if we don't change," Lin frequently told his employees in times of difficulty. The other thing he often said is "Innovation may fail, but we would have already failed if we refused to innovate."

To solve the problems of redundant personnel and a rigid management system, the company improved its recruitment and salary evaluation system, and withdrew capital from over 120 small and medium-sized companies, to redeploy resources in the group's major business. It gave stock equity to key employees to encourage them to make more contributions.

It also turned to new and promising industries, such as new energy, new materials, the medical and healthcare sectors, as well as finance, Lin said.

After the reform, the company showed double-digit growth in 2015. In 2017, its revenue reached about 40 billion yuan with profits totaling 2.33 billion yuan, ranking it among the top companies locally.

A similar story can be heard from Fujian Electronics and Information Group.

When the company was founded in 2000 after a merger of local State-owned electronic companies, it was assessed as having 780 million yuan in negative equity. Almost all the 150 member firms were in debt.

In 2004, the group began to attract private capital, with private shareholders injecting flexibility and new management practices into the SOE.

Last year, the revenue of Fujian Electronics and Information topped 22 billion yuan, up 98.5 percent from 2014. The annual compound growth rate reached 25.68 percent.

The reform of SOEs has also brought significant change to the economy of the whole province. The total profit of SOEs in Fujian reached more than 25 billion yuan in 2017, up 95.5 percent from a year ago.

Yu Weiguo, Party chief of Fujian, said earlier this year that the province would stick to its new development philosophy, optimize its regulatory system and deepen reform of SOEs to promote high-quality development.

(China Daily 10/08/2018 page6)