Government sets deadline for central SOEs reform

Closing down "zombie companies", relocating workers and shutting sidelines businesses that detract from their core competences are among the measures the government will introduce in the coming two to three years to deepen the country's reform in central State-owned enterprises (SOEs).

The decision was unveiled during a State Council's executive meeting on Wednesday chaired by Premier Li Keqiang.

"Central SOEs have played an indispensable role for China's social and economic development, and we should give them full credit on that regard," Li said. "Yet crucial problems still exist, and now we must tackle them step by step, which is what the SOE reform is about."

Central SOEs in China, which totals 106, refer to those Stateowned enterprises owned by the central government. Most of these companies cover key sectors such as telecommunication and energy, that are crucial to the country's social and economic development.

Major problems currently existing with the central SOEs include weakness in core business, too many sideline businesses, low efficiency and excessive layers of administration and management. Yet such over hierarchy at these central SOEs are also part of the reason that why reforms has never been easy to realize. In many occasions, Premier Li has reiterated time and again that the government is determined to carry out such reform, describing such determination as "cutting one's own wrist like brave warriors".

The Wednesday meeting decided that 345 "zombie companies" subsidized with the 106 central SOEs will be reorganized or left to the market within three years. Central SOEs are also required to shrink management levels from the existing five to nine to lower than three or four, while stripping off 20 percent of their subsidiary legal entities within three years.

The government aims to reduce losses caused by central SOE's subsidiary enterprises by 30 percent, and realize 100 billion yuan of increase in central SOE profit by the end of 2017.

Meanwhile, the government will cut the country's coal and steel capacity produced by central SOEs by 10 percent this year and in 2017. Coal, iron and steel are among the key objectives in the country's effort to reduce excess capacity.

During the Wednesday meeting, Li again stressed that the idea of "weight loss and fitness" plan for SOEs should be further carried out, a metaphor that he first used in this year's government work report referring to an optimization of SOEs in general.

The reform of SOE in general is a major working task set by the government in this year's government work report, delivered in March by Premier Li. It has pointed out that the government will push hard to ensure success in upgrading SOEs, pledging that structural adjustment will be made so that they will be developed through innovation, reorganization and reform in SOE personnel management.

"Fostering greater spirit of craftsmanship is of vital importance for central SOEs while concentrating in their core business and improve product quality, and this should be the core competence of central SOEs", Li urged during the Wednesday meeting, adding that they should not turn too much into sideline businesses that the private sectors are good at.

The new plan also encourages internal restructuring for central SOEs and optimizing allocation of resources. Social capital will be encouraged to participate and support central SOEs restructuring.

The new plan also calls for more innovation and that scientific research should be carried out in central SOEs.