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

Video Five Patients Given Experimental Ebola Drug Said To Be Improving

Experimental drugs have been tried on six people: three Westerners and now, three African pyhysicians More

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As Ukrainian military reclaims control of eastern cities residents rebuild their lives, but many say everyone is being treated with suspicion More

Video In Rural Kenya, Pressure Builds Against Female Circumcision

Girls learn to object; FGM practitioners face penalties from jail sentences to stiff fines 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.
Five Patients Given Experimental Ebola Drug Said to Be Improvingi
X
Carol Pearson
August 19, 2014 11:43 PM
The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video Five Patients Given Experimental Ebola Drug Said to Be Improving

The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As the Ukrainian military reclaims control of eastern cities from pro-Russian separatists, residents are getting a chance to rebuild their lives. VOA's Gabe Joselow reports from the town of Kramatorsk in Donetsk province, where a sense of fear is still in the air, and distrust of the government in Kyiv still runs deep.
Video

Video China Targets Overseas Assets of Corrupt Officials

As China presses forward with its anti-graft effort, authorities are targeting corrupt officials who have sent family members and assets overseas. The efforts have stirred up a debate at home on exactly how many officials take that route and how likely it is they will be caught. Rebecca Valli has this report.
Video

Video Leading The Fight Against Islamic State, Kurds Question Iraqi Future

Western countries including the United States have begun arming the Kurdish Peshmerga forces in northern Iraq to aid their battle against extremist Sunni militants from the Islamic State. But there are concerns that a heavily-armed Kurdistan Regional Government, or KRG, might seek to declare independence and cause the break-up of the Iraqi state. As Henry Ridgwell reports from London, the KRG says it will only seek greater autonomy from Baghdad.
Video

Video In Rural Kenya, Pressure Builds Against Female Circumcision

In some Kenyan communities, female genital mutilation remains a rite of passage. But activists are pushing back, with education for girls and with threats of punishment those who perform the circumcision. Mohammed Yusuf looks at the practice in the rural eastern community of Tharaka-Nithi.
Video

Video For Obama, Racial Violence is Personal Issue

The racial violence in the St. Louis suburb of Ferguson is presenting U.S. President Barack Obama with an issue to which he has a deep personal connection. To many Americans, Obama's election as America's first black president marked a turning point in race relations in the United States, and Obama has made ending the violence a policy priority. On Monday he issued a new call for calm and understanding. Luis Ramirez reports from the White House.
Video

Video Clinton-Obama Relationship Could Impact 2016 Election

President Barack Obama and former Secretary of State Hillary Clinton have a long and complicated relationship. That relationship took another turn recently when Clinton criticized the president’s foreign policy. VOA National Correspondent Jim Malone reports there is renewed attention on the Clinton-Obama relationship as Hillary Clinton considers running for
Video

Video Iran Looks to Maintain Influence in Baghdad With New Shia PM

Washington and Tehran share the goal of stopping Syrian-based militants in Iraq. But experts say it's Iran, not the United States, that will most influence how the new government in Baghdad approaches internal reforms and the war in Syria. VOA State Department Correspondent Scott Stearns has the story.

AppleAndroid

World Currencies

EUR
USD
0.7492
JPY
USD
102.27
GBP
USD
0.5960
CAD
USD
1.0950
INR
USD
61.300

Rates may not be current.