SOES to Face Market Competition

Chairman of the National Development and Reform Commission, SOES can be divided into two types: those that provide public goods and those that seek to attain commercial goals. Both types of SOES are primarily independent market players, and they must follow the market economy and corporate growth rules, serve the nation’s development strategies and work for both economic and social benefits.

The two SOE types differ, however, in their development objectives. Commercially-oriented SOES should aim to maintain state-owned assets and increase their market value, while publicly-oriented SOES should focus on ensuring people’s livelihoods and providing public products and services. After clarifying the development targets for each type, reform should follow a correspondingly appropriate path.

SOES seeking commercial gain should implement a thorough mixed ownership reform and establish a modern corporate structure by diversifying shareholding structure. The ownership of such SOES will be arranged according to type. State-owned capital will retain majority control of SOES engaged in national security or economic lifelines. SOES in fully competitive industries should reduce stakes held by state-owned capital, adopt more open and diversified shareholding structures and be listed on the stock market. SOES holding industry monopolies must actively advance reform under the principles of dividing government functions from corporate management, promoting marketoriented allocation of public resources, and introducing other state-owned capital to enterprises that must be fully state-owned.

SOES providing public benefits may be fully controlled by state capital, although a structure of diversified ownership can be adopted in some qualified enterprises. Non-state enterprises will also be encouraged to participate in such SOES’ business operations through means such as purchase of services and franchising.

Whether SOES are commercially or publicly oriented, their status as market participants determines that they must fully engage in market competition both at home and abroad. Thus, openness and diversification of shareholding structures will become necessary.

In a fiercely competitive market, equality among players - SOES, private