Reform of state-owned enterprises (SOE) has markedly accelerated in recent years. The author wishes to briefly sift and sort the policies on the mixed-ownership reform of SOEs under the central government and in key municipalities during the past three years.
Central policies. On 24 August 2015, the Central Committee of the Communist Party of China and the State Council issued the Guiding Opinions on Intensifying the Reform of SOEs (the guiding opinions), setting forth guiding principles for promoting the mixed-ownership reform of SOEs, bringing in non-state-owned capital to participate in the reform of SOEs, encouraging the use of state-owned capital to take equity stakes in non-state-owned enterprises by various means, exploring the implementation of shareholding by mixed-ownership enterprise employees, etc.
On 23 September 2015, the State Council issued its Opinions on the Mixed-Ownership System for SOEs (the mixed-ownership opinions), specifying the tasks for the development of the mixed-ownership system by SOEs in the following five areas: (1) based on the definition and classification of the functions of SOEs, promoting the mixed-ownership reform of SOEs by category; (2) promoting this reform of SOEs by level; (3) encouraging the participation of various types of capital in the mixed-ownership reform of SOEs; (4) establishing a sound governance mechanism for mixed-ownership enterprises and implementing a professional manager system for such enterprises; and (5) establishing lawful and compliant operating rules.
The guiding opinions, as the “top-level SOE reform design”, and its complementary document, the mixed-ownership opinions, jointly constitute the guiding and programmatic documents for the advancement of the mixed-ownership system for SOEs and set forth the overall requirements for the core philosophy of, and the complementary measures for, the development of the mixed-ownership system by SOEs.
On 19 August 2016, the State-Owned Assets Supervision and Administration Commission issued the Notice on the Issuance of the Opinions on Launching a Pilot Employee Shareholding Project by State-Controlled Mixed Ownership Enterprises (Document No. 133). Document No. 133 sets forth clear guidance on such key issues and stages relating to launching pilot employee shareholding projects by state-controlled mixed-ownership enterprises as the pilot project principles, the criteria for pilot enterprises, the issues involved in employees taking equity stakes (scope, capital contribution, price for such stakes, shareholding percentage, equity structure, shareholding method, etc.), management of employee equity, etc. Recently, The National Development and Reform Commission issued a document stating that the mixed-ownership reform of SOEs is to be given a further push, with the main point of attack at the next step being reduction of the gearing ratio of SOEs and the clearing up of zombie enterprises being a key means of reducing gearing. The merger and restructuring of enterprises will be given further support.
Beijing: In August 2014, Beijing issued the Opinions on Comprehensively Intensifying the Reform of Beijing Affiliated State-Owned Assets and SOEs, proposing accelerating the promotion of cooperation between Beijing affiliated SOEs and enterprises under the central government. On 25 August 2016, the Beijing municipal government issued the Implementing Opinions on the Development of the Mixed-Ownership System by Beijing Affiliated State-Owned Enterprises, proposing guiding subsidiaries at every level to carry out the mixed-ownership reform and exploring the promotion of the mixed-ownership reform at the group company level.
On 7 January 2017, the Beijing municipal government issued the Implementing Opinions on Reforming and Improving the System for the Administration of State-Owned Assets, expressly stating that the position of SOEs as market entities will be established based on the requirements of separating the government and the enterprise, separating the governmental functions and the functions of state-owned asset authorities, and separating the ownership and the right of operation.
Shanghai: On 18 December 2013, Shanghai issued the first plan for the reform of local state-owned assets and SOEs, the Opinions on Further Intensifying the Reform of State-Owned Assets in Shanghai to Promote Enterprise Development, providing framework guidance for the mixed-ownership reform. In July 2014, Shanghai issued the Several Opinions on Promoting the Active Development of the Mixed-Ownership System by SOEs in Shanghai, further specifying the requirements for, and the objectives, forms and means of, promoting the mixed-ownership system.
On 22 January 2016, the Shanghai Municipal State-Owned Assets Supervision and Administration Commission issued the Operational Guidelines for the Change to the Mixed Ownership System by SOEs in Shanghai (for Trial Implementation), clarifying such issues in the mixed-ownership reform of Shanghai affiliated SOEs as the general procedure, decision-making on the change in system, auditing, valuation, trading of property rights, etc., continually providing greater detail on the mixed-ownership reform policies for Shanghai affiliated SOEs and providing practical guidance.
Shenzhen: In January 2014, the overarching philosophy for state-owned asset and SOE reform in Shenzhen was set forth at a Shenzhen state-owned assets and SOE working meeting. In October 2014, Shenzhen issued the General Plan for Further Intensifying the Reform of State-Owned Assets and SOEs in Shenzhen. At the start of 2017, the Shenzhen Municipal State-Owned Assets Supervision and Administration Commission formulated the Implementing Plan for Further Intensifying the Reform of Shenzhen Affiliated SOEs to Promote Development. The plan covers 12 complementary policies in such key reform areas as the list of authorities and responsibilities, classification of functions, selection and employment of personnel, incentives and constraints, structural adjustment, fault tolerance mechanism, etc.
In recent days, the Shenzhen State-Owned Assets Supervision and Administration Commission held a meeting where it proposed intensifying the promotion of SOE reform, requested the setting up of a series of systems revolving around the reform of SOEs throughout Shenzhen, accelerating promotion of key reform tasks, such as innovation in the state-owned asset regulatory system and mechanisms, mixed ownership reform, market-oriented personnel selection and employment reform, enterprise remuneration and incentive mechanism reform, etc., so as to explore experiences for SOE reform nationwide.
Author: Cindy Hu is a partner and Yang Hui is a trainee at East & Concord Partners