Brain drain pushes SOE reform to forefront
Firms play a key role in driving Chinese economy
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.