News / Economy

China Reform Plan to Test State-run Companies

A visitor looks at an E30 EV, a small electric vehicle of Chinese state-owned automobile manufacturer Dongfeng Motor Co., at China International Industry Fair in Shanghai, Nov. 5, 2013.
A visitor looks at an E30 EV, a small electric vehicle of Chinese state-owned automobile manufacturer Dongfeng Motor Co., at China International Industry Fair in Shanghai, Nov. 5, 2013.
William Ide
China has announced a new wave of wide-ranging economic reforms that could put unprecedented pressure on the country’s state-owned enterprises and perhaps end decades of government dominance in some sectors of the economy.  
 
China’s release late last week of a long list of what could become a historic new wave of reforms included specific details about a wide range of issues - from social changes such as easing the country’s one-child policy to measures to protect the environment. It even included plans to streamline the military, and anti-corruption measures that would provide government officials with housing and bar them from occupying other properties.
 
But, among the some 60 objectives outlined in the report, economic reforms were the most prominent.
 
China’s economy is expanding at its slowest rate in more than two decades and there are growing calls for the government to create a new economic model for the country. A model that relies less on exports and more on domestic consumption, that gives small and medium sized businesses more room, and allows the market to play a bigger role in the traditionally state-controlled economy.
 
Analysts say the proposed changes to state-owned enterprises will be key to ensuring the success of the overall reform effort.
 
Barry Naughton is an economist and professor at the University of California San Diego.  He says, “The people who wrote this report are obviously trying to create significant movement on state-owned enterprises. They put a lot of concrete provisions about state-enterprise reform.”
 
Transparency and openness
 
Some of those provisions include a push for more transparency from state-run companies, more openness in their reports and budgets. The reform plan also addresses things such as the pay managers at state-owned companies make and the need to make the companies more market based.
 
State enterprises will also be asked to give a larger share of their revenues back to the government.  Currently, state companies contribute around 10 to 15 percent of their revenues to social welfare. According to the plan, they will need to increase that amount to 30 percent by 2020.
 
In a recent interview with state-run broadcaster CCTV, a leading economic official in the Communist Party, Yang Weimin, vice head of the Office of the Central Leading Group on Finance and Economic Affairs, says the government’s reforms aim to create a more level playing field between private and state-owned enterprises.
 
The reforms would allow more private participation in state-owned companies and in some sectors, he says, the state may withdraw and let private enterprises take over.  Yang says this really is new:  "Perhaps people looking at the document might think that they have heard all of this before, but the intensity of these reform measures is considerably stronger."
 
Retain much control
 
China is unlikely to loosen state-run companies' control of key national security sectors, but according to the plan, the government will remove obstacles to foreign investment in the services sector, including banking and finance.
 
Cai Jiming, an economics professor at Tsinghua University, says the government is looking to make state-run companies more competitive by allowing outside investment.
 
"When foreign or private investment enters a state owned enterprise, exclusively state owned, and undergoes a transformation of its share holdings, then it can only operate according to modern industry standards, and has to integrate - blend in with the market," says Cai. "This means that they have to break away from the government's interference with the company."
 
UCSD’s Barry Naughton says one of the best things about the report is its mention that the government will reduce its intervention in the economy. And that is something where state-owned enterprise reform is key as well.
 
Naughton says, “There are many parts in it ((the report)) where it advocates a more fair, rules based competition. Everybody’s got the same rights. So, those are nice strong statements, but they don’t mean anything unless they are willing to tackle some of the privileges state-owned enterprises have."
 
State-owned enterprises have long enjoyed easy access to cheap loans from state-run banks, subsidies and unfettered competition. They also enjoy considerable political influence within the government and some enterprises are more powerful than government ministries. Because of that, analysts add, pushing these reforms through will be no small task.

You May Like

Tired of Waiting, South Africans Demand Change ‘Now’

With chronic poverty and lack of basic services largely fueling recent xenophobic attacks, many in Rainbow Nation say it’s time for government to act More

Challenges Ahead for China's Development Plans in Pakistan

Planned $46 billion in energy and infrastructure investments in Pakistan are aimed at transforming the country into a regional hub for trade and investment More

Audio 'Forbidden City' Revisits Little Known Era of Asian-American Entertainment

Little-known chapter of entertainment history captured in 80s documentary is revisited in new digitally remastered format and book More

This forum has been closed.
Comment Sorting
Comments
     
by: VANSON TRAN from: USA
November 17, 2013 9:35 PM
To my knowledge, Communism has been loosing its Objective to realize Equal Welfare for People since the Collapse of Soviet Union, and returning to the Capitalist Economy Market (CEM) which has also been progressing by previous Pure Capitalists in the past centuries when they returned their Colonies to related People. In reality Communist China, North Korea and Vietnam plus Cuba have been directing their Ideoology (Communism) into CEM as well under their New Terminology "Socialism Directed To The Economy Market"; However, They missed Considering This Equation: One Side is Socialism, and Another Side is Capitalism. This Equation has its two Conflicting Elements that must be chosen with ONE. Gradually, we realized Communists have become Red Capitalists, not Socialists at all? This is the reason, They Must Reform Many Times Until Its Theory and Practice are in balance when they become exactly as Capitalist Democratic Nations sooner or later./.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Study: Insecticide Damaging Wild Bee Populationsi
X
April 24, 2015 10:13 PM
A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Study: Insecticide Damaging Wild Bee Populations

A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Data Servers Could Heat Private Homes

As every computer owner knows, when their machines run a complex program they get pretty hot. In fact, cooling the processors can be expensive, especially when you're dealing with huge banks of computer servers. But what if that energy could heat private homes? VOA’s George Putic reports that a Dutch energy firm aims to do just that.
Video

Video Cinema That Crosses Borders Showcased at Tribeca Film Festival

Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video UN Confronts Threat of Young Radicals

The radicalization and recruitment of young people into Islamist extremist groups has become a growing challenge for governments worldwide. On Thursday, the U.N. Security Council heard from experts on the issue, which has become a potent threat to international peace and security. VOA’s Margaret Besheer reports.
Video

Video Growing Numbers of Turks Discover Armenian Ancestry

In a climate of improved tolerance, growing numbers of people in Turkey are discovering their grandmothers were Armenian. Hundreds of thousands of Armenians escaped the mass deportations and slaughter of the early 1900's by forced conversion to Islam. Or, Armenian children were taken in by Turkish families and assimilated. Now their stories are increasingly being heard. Dorian Jones reports from Istanbul that the revelations are viewed as an important step.
Video

Video Migrants Trek Through Western Balkans to Reach EU

Migrants from Africa and other places are finding different routes into the European Union in search of a better life. The Associated Press followed one clandestine group to document their trek through the western Balkans to Hungary. Zlatica Hoke reports that the migrants started using that route about four years ago. Since then, it has become the second-most popular path into Western Europe, after the option of sailing from North Africa to Italy.
Video

Video TIME Magazine Honors Activists, Pioneers Seen as Influential

TIME Magazine has released its list of celebrities, leaders and activists, whom it deems the world’s “most influential” in 2015. VOA's Ramon Taylor reports from New York.
Video

Video US Businesses See Cuba as New Frontier

The Obama administration's opening toward Cuba is giving U.S. companies hope they'll be able to do business in Cuba despite the continuation of the U.S. economic embargo against the communist nation. Some American companies have been able to export some products to Cuba, but the recent lifting of Cuba's terrorism designation could relax other restrictions. As VOA's Daniela Schrier reports, corporate heavy hitters are lining up to head across the Florida Straits - though experts urge caution.
Video

Video Kenya Launches Police Recruitment Drive After Terror Attacks

Kenya launched a major police recruitment drive this week as part of a large-scale effort to boost security following a recent spate of terror attacks. VOA’s Gabe Joselow reports that allegations of corruption in the process are raising old concerns about the integrity of Kenya’s security forces.
Video

Video Japan, China in Race for Asia High-Speed Rail Projects

A lucrative competition is underway in Asia for billions of dollars in high-speed rail projects. Cambodia, India, Indonesia, Malaysia Thailand and Vietnam are among the countries planning to move onto the fast track. They are negotiating with Japan and the upstart Chinese who are locked in a duel to revolutionize transportation across Asia. VOA Correspondent Steve Herman in Bangkok has details.
Video

Video Scientists: Mosquitoes Attracted By Our Genes

Some people always seem to get bitten by mosquitoes more than others. Now, scientists have proved that is really the case - and they say it’s all because of genes. It’s hoped the research might lead to new preventative treatments for diseases like malaria, as Henry Ridgwell reports from London.
Video

Video Bible Museum Coming to Washington DC

Washington is the center of American political power and also home to some of the nation’s most visited museums. A new one that will showcase the Bible has skeptics questioning the motives of its conservative Christian funders. VOA religion correspondent Jerome Socolovsky reports.
Video

Video Armenia and Politics of Word 'Genocide'

A century ago this April, hundreds of thousands of Armenians of the Turkish Ottoman empire were deported and massacred, and their culture erased from their traditional lands. While broadly accepted by the U.N. and at least 20 countries as “genocide”, the United States and Turkey have resisted using that word to describe the atrocities that stretched from 1915 to 1923. But Armenians have never forgotten.
Video

Video Afghan First Lady Pledges No Roll Back on Women's Rights

Afghan First Lady Rula Ghani, named one of Time's 100 Most Influential, says women should take part in talks with Taliban. VOA's Rokhsar Azamee has more from Kabul.
Video

Video New Brain Mapping Techniques Could Ease Chronic Pain

From Boulder, Colorado, Shelley Schlender reports that new methods for mapping pain in the brain are providing validation for chronic pain and might someday guide better treatment.

VOA Blogs

World Currencies

EUR
USD
0.9238
JPY
USD
119.51
GBP
USD
0.6614
CAD
USD
1.2119
INR
USD
63.562

Rates may not be current.