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The operation and governance mechanism of State-owned capital investment companies (No 162, 2014)


Research team on State-owned assets management system reform, by Yuan Dongming & Tao Pingsheng, Institute for Enterprise Research, Development Research Center of the State Council (DRC)

Report No 162, 2014 (Total 4661)


State-owned capital investment companies serve as an important means to improve the supervision of State-owned assets, with the focus on capital management.These companies are the major entity for market-based capital operations and exercise promoters' power over investment enterprises by way of capital management, but they are not involved in direct production or operations, nor do they intervene in daily business activities of physical enterprises.The key to an efficient performance of market-based investment institutions lies in a scientific operation and governance mechanism. While observing the fact that investment companies are market entities, internal control and excessive power should be avoided. The following three issues should be properly addressed. First, ways for the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) in managing investment companies. The SASAC should, on the one hand, streamline administration, and delegate more powers to lower levels, and on the other, enhance their governance ability. Second, ways on the laying out of the corporate governance structure. Efforts should be made to prevent internal control of market-based operation, while bringing out companies' vitality. And third, ways for the management of investment enterprises by investment companies. The State-owned capital investment companies should follow the relevant business rules, perform investors' duties, in managing capital and play an active role as shareholders.