In the process of developing and nurturing its economic system,
the reorientation of governmental functions toward the market
represents a fundamental strategy of the Chinese Government.
Since the scheme for comprehensively bolstering reforms was
first put forward in November 2013, a series of measures have been
introduced: the streamlining of government administration, the
devolution of power to lower levels, and the lowering or outright
removal of the thresholds for investment.
Over the past year, these reforms have greatly furthered China's
economic transformation and upgrade. The environment for private
and foreign capital has improved immeasurably.
Although the strides recently taken have doubtlessly been
impressive, they still have not gone sufficiently far. Nothing less
than the wholesale dismantling of a status quo in which state
capital enjoys a position of privilege in economic activities
represents the key to securing a decisive role for the market in
the distribution of resources. Therefore, further reform of its
state-owned enterprises (SOEs) is systemic to enabling China to
better balance the relationship between the government and the
China is now launching yet another round of reforms on SOEs.
Detailed reform schemes have been submitted to the Central
Government, which are expected to be formally announced after this
March's annual NPC and CPPCC National Committee sessions.
This latest reform plan will most likely center on measures long
anticipated by the market such as the overhaul of mixed ownership
and the proliferation of share ownership among SOE employees. The
purpose is to retain state-owned capital's controlling interest,
while reducing its proportion in the enterprises' overall capital
This will be the third large-scale reform that China has
launched on its SOEs, and historic breakthroughs are expected to
arise from it. Compared to the first reform in the 1990s, primarily
intended to replace the model of a planned economy with a modern
corporate system, and the second reform in the early years of this
century, designed to break up the monopoly held by SOEs in the
domestic market, the recent set of reforms mean to furnish
state-owned and non-state-owned capital with a platform upon which
they can cooperate and compete equitably with one another.
Meanwhile, the government hopes to facilitate a fresh injection
of private capital into SOEs through reforms on the mixed ownership
system. This will enable the state-owned and private sectors to
enjoy the "best of both worlds," with regard to human and financial
capital and play to each other's strengths. The influx of private
capital will serve to improve SOEs' business strategies, and,
hopefully, private expertise will help minimize strategic mistakes
made at SOEs' managerial level and consequently limit the damage
done to shareholders' interests.