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.
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

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants 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.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs

World Currencies

EUR
USD
0.9012
JPY
USD
122.90
GBP
USD
0.6400
CAD
USD
1.2582
INR
USD
63.438

Rates may not be current.