Brain drain pushes SOE re­form to fore­front

Firms play a key role in driv­ing Chi­nese econ­omy

Global Times - Weekend - - BUSINESS - By Zhang Hong­pei

The im­pe­tus of China’s Sta­te­owned en­ter­prises (SOEs) re­form is set to be pushed ahead and it will fo­cus more on giv­ing full play to tal­ent’s value via im­proved mech­a­nisms, in­dus­try an­a­lysts said.

The com­ments fol­lowed an on­line re­port on Thurs­day that a key re­searcher from a State-owned re­search in­sti­tute who re­signed and moved to a pri­vate com­pany ear­lier this year is fac­ing a de­mand for ar­bi­tra­tion from the in­sti­tute due to be­ing in­volved in na­tional key pro­grams.

Xi’an Aerospace Propul­sion In­sti­tute ap­plied for ar­bi­tra­tion at a lo­cal la­bor dis­pute ar­bi­tra­tion agency on May 20, seek­ing to re­tain the re­searcher, Zhang Xiaop­ing, a rocket en­gine de­signer, Bei­jing Youth Daily said Thurs­day.

Zhang quit the State-owned in­sti­tute job mainly be­cause of low salary in sharp com­par­i­son with what a pri­vate firm can of­fer, me­dia re­ports said. He was ur­gently needed back at the in­sti­tute as he is the soul for a key rocket en­gine project, hav­ing an ir­re­place­able role, ac­cord­ing to a le­gal doc­u­ment re­gard­ing the mat­ter that was widely cir­cu­lated on­line.

The re­ports trig­gered heated dis­cus­sion on­line about SOEs’ plight in re­tain­ing tal­ent. While the key role of SOEs in driv­ing China’s econ­omy, es­pe­cially their con­tri­bu­tion to key na­tional de­fense and sci­ence and tech­no­log­i­cal projects, can­not be de­nied, Zhang’s case rings an alarm bell and of­fers a chance for SOEs and re­search in­sti­tutes to re­form their pay struc­tures and man­age­ment mech­a­nisms to re­tain tal­ent.

Feng Liguo, a re­search fel­low with China Min­sheng Bank, told the Global Times on Fri­day that brain drains had been in­creas­ingly seen at both cen­tral and lo­cal SOEs over re­cent years, mainly due to salary caps.

Many young re­searchers and sci­en­tists have moved to the pri­vate sec­tor, while oth­ers have cho­sen to start their own busi­nesses, said Feng.

A male white-col­lar em­ployee who worked in a cen­tral SOE for one year and left to join a pri­vate com­pany in 2016 told the Global Times on Fri­day that his salary at the SOE wasn’t enough to live a de­cent life es­pe­cially in Bei­jing, a first-tier city. He asked to re­main anony­mous.

He added that it was hard to only fo­cus on his work and try to earn as much money as he could. “You have to con­sider how to climb the pro­fes­sional lad­der and as­sess “SOEs’ most im­por­tant as­sets are not things but tal­ented peo­ple." Zhou Fang­sheng Vice chair­man at China En­ter­prise Re­form and De­vel­op­ment So­ci­ety.

the whole en­vi­ron­ment.”

An en­gi­neer who has worked for five years at an SOE in Bei­jing in the aerospace sec­tor said he’s not be­ing paid what he’s worth. “There is lim­ited pro­mo­tion space if you al­ways stay in tech­ni­cal posts, so you have to con­sider ad­min­is­tra­tive Global Times on posts,” Fri­day, also ask- he told the

ing An­a­lysts to re­main said anony­mous. the con­tro­ver­sial

case of Zhang Xiaop­ing will push pol­i­cy­mak­ers to ac­cel­er­ate SOE re­form.

Zhou Fang­sheng, vice chair­man at the China En­ter­prise Re­form and De­vel­op­ment So­ci­ety, said the root cause of the brain drain is that SOEs’ salary struc­tures date back to the era of the planned econ­omy. This dis­cour­ages staff and re­quires ur­gent re­form.

“SOEs’ most im­por­tant as­sets are not things but tal­ented peo­ple. The re­forms should mo­ti­vate tal­ent” by bring­ing salaries in line with the mar­ket, Zhou said.

SOE re­form has been cau­tiously ad­vanced in re­cent years, mostly in pi­lot pro­grams, Zhou said.

In Au­gust, the State Coun­cil, China’s cabinet, des­ig­nated about 400 SOEs for mar­ket re­forms by 2022, and it in­structed each to draft a com­pre­hen­sive re­form plan by the end of Septem­ber.

China is mak­ing full prepa­ra­tions for broad SOE re­forms, with fur­ther im­ple­men­ta­tion set to come next year, said Li Jin, a Bei­jing-based in­dus­try ex­pert.

As of the end of June, to­tal as­sets of SOEs reached 171 tril­lion yuan ($24.84 tril­lion), up 9.4 per­cent from a year ear­lier, ac­cord­ing to the Xin­hua News Agency.

SOEs saw a surge in prof­its in the first half of this year amid re­forms that aim to in­crease their ef­fi­ciency. SOEs listed on the Shen­zhen Stock Ex­change re­ported com­bined prof­its of 147.8 bil­lion yuan, up 32 per­cent year-on-year, data from the ex­change showed.

Sep­a­rat­ing gov­ern­ment func­tions from en­ter­prise man­age­ment and build­ing a mod­ern en­ter­prise man­age­ment sys­tem by fa­cil­i­tat­ing mixed-own­er­ship re­forms are the two key as­pects to push for­ward, noted Li.

File photo: VCG

An ex­hi­bi­tion booth of China Aerospace Sci­ence and Tech­nol­ogy Corp at an in­dus­try expo in Bei­jing

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