Focus on high-quality development of SOEs

The State-owned Assets Supervision and Administration Commission of the State Council recently convened a meeting of local assets supervision and administration commissions and asked them to expedite reform, strengthen supervision of State-owned assets and boost high-quality development of State-owned enterprises.

The meeting resolved to realize the goals set by the Fourth Plenary Session of the 19th Communist Party of China Central Committee, which decided to explore various forms of public ownership and improve the distribution mechanism of the State sector, develop a mixed-ownership economy, enhance the State sector's competitiveness and innovation capability, and reduce financial risks, in order to optimize and increase State capital.

The meeting of the heads of central SOEs convened earlier had emphasized the importance of improving the performance assessment indicators such as net profit, total profit, assets-liability ratio, profit margin, and research and development input to stimulate high-quality development of the SOEs and help them play a bigger role in technological innovation.

In 2020, SOE reform should focus on infusing Chinese characteristics into the modern enterprise system, improving their market-oriented operations, promoting mixed ownership reform, and setting up a unified regulatory and supervisory mechanism for State-owned assets supervision.

Full implementation of the market access negative list will help China strengthen competitive policies, review fair competition practices, advance the construction of the factor market system, and promote efficient and fair distribution of factors of production. There is also a need to strengthen the mechanism to assess the SOEs' return rate, so as to ensure the return rate of State-owned capital is at least equal to the average market rate of return by, for example, eliminating various subsidies and preferences given to SOEs.

SOE reform is necessary to further open up the economy. Also, regulators should create a more relaxed environment for SOE reform, by adopting more market-oriented means to optimize the distribution of State capital.

Marketization is the key to invigorate SOEs and only in a market-oriented environment can SOEs help form a modern enterprise system and realize high-quality development.