Since the 16th National Congress of the Communist Party of China (CPC) and with the development of the reform of the state-owned assets management system, the SOEs reform has entered a new stage. In recent years, as a specially established institution which performs investors' responsibilities for the state-owned assets of enterprises on behalf of the Chinese government, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) focuses on establishing and improving the state-owned assets administration and management system, strengthens administration and management on state-owned assets, accelerates the reform and development of SOEs, promotes the adjustment of the layout and structure of the state economy, and does some innovative work. We establish and improve the state-owned assets administration and management system with setting up institution, perfecting rules and regulations and ascertaining responsibilities as the points of penetration. We strengthen administration and management as investor by means of financial supervision and risk control. We combine the principle of administering cadres by the Party with market-oriented recruitment with publicly recruiting senior management of the central SOEs as the breach, and we are exploring the way of establishing a new mechanism for selecting and employing people, which meets the requirement of modern enterprise system. We establish modern enterprise system and improve corporate governance while focusing on the share-holding reform of large SOEs. We promote the adjustment of the layout and structure of SOEs with approving the core businesses and promoting coalition and restructuring of SOEs as the main line. We standardize the restructuring of SOEs and the transfer of state-owned property right while focusing on establishing a modern property right system. With our efforts, the framework of the new state-owned assets administration and management system has been primarily established, the supervision and management on state-owned assets have been enhanced and the responsibilities for preserving and increasing the value of state-owned assets have been ascertained.
The transformation of the system has triggered the SOEs vitality. In recent years, significant achievements have been made in SOEs reform and development. The total amount of the state economy has been further increased. The economic returns, operational quality and competitiveness have been significantly increased, and the control power, influence and stimulating power have been further strengthened. In 2006, there were a total of 119,000 SOEs in China, which were 31,000 less than that of 2003. But their sales revenue added up to 16.2 trillion yuan which was up 50.9% compared with 2003, with an average annual growth rate of 14.7%; the total profits reached 1.2 trillion yuan which was up 147.3% compared with 2003, with an average annual growth rate of 35.2%; the taxes-paid registered 1.4 trillion yuan which was up 72% compared with 2003, with an average annual growth rate of 19.8%; the assets of these enterprises totaled 29 trillion yuan which was up 45.7% compared with 2003, with an average annual growth rate of 13.4%. The assets of each SOE averaged 240 million yuan, which was up 84.6% compared with 2003, with an average annual growth rate of 22.7%.
In the year 2006, the central SOEs achieved sales revenue of 8.3 trillion yuan, which was up 85.3% compared with 2003, with an average annual growth rate of 22.8%. They achieved a profit of 768.15 billion yuan, which was up 155.5% compared with 2003, with an average annual growth rate of 36.7%. The taxes-paid registered 682.25 billion yuan, which was up 91.5% compared with 2003, with an average annual growth rate of 24.2%. The return on equity was 10.1%, which was 5.1 percentage points higher than that of 2003; the return on assets was 7.9%, which was 2.9 percentage points higher than that of 2003. By the end of 2006, the assets of the central SOEs totaled 12.2 trillion yuan, which was up 46.5%, with an average annual growth rate of 13.6%. Their net assets totaled 5.39 trillion yuan, which was up 49.7% compared with 2003, with an average annual growth rate of 14.4%. During the first three-year term of performance assessment for the central SOEs after the establishment of SASAC, the total assets averaged an increase of 1.3 trillion yuan each year; the sales revenue grew by 1.2 trillion yuan on average each year; the profits achieved increased by 150 billion yuan on average each year, the taxes-paid grew by 100 billion yuan on average each year, and the rate of preserving and increasing the value of state-owned assets reached 144.7%. In 2006, there were 21 central SOEs whose sales revenue exceeded hundreds of billion yuan and 13 central SOEs whose profits exceeded tens of billion yuan, 12 and 7 more than that of 2003 respectively. Sixteen central SOEs were ranked among the world's Top 500 published in 2007, 10 more than that of 2003.
The SOEs develop quickly and at the same time they play an important role in carrying our China's macro regulation policies, securing market supply, supporting the sustainable, fast, healthy and harmonious development of the national economy. They have made active contribution for the development of the economy and society. When the price of imported oil products was much higher than that of domestic oil products, the SOEs in oil and petrochemicals industry made efforts in improving management and reducing costs to ensure the stable supply of domestic oil products. The SOEs in electric power industry strengthened the upgrading of the power grid, accelerated the development of the rural power cause, comprehensively promoted the "Power for All" project and ensured the power supply. The SOEs in telecom industry implemented the project of "telephone service for each village" and played an important role in the informationization construction of the economy and society. The SOEs in military industry deepened reform, accelerated technological innovation, and accomplished the tasks of carrying out research and development and manufacturings of military products timely with quality and quantity guaranteed, and have made significant contribution to the modernization drive of the national defense. The central SOEs in construction, building materials, commerce and trade industries all made significant contribution to the construction of key national projects and stabilizing the market.
Over the past couple of years, the SOEs have earnestly acted in the spirit of the 16th CPC National Congress and its plenary sessions, carried out and put into effect a series of important plans of the Central Committee of the Party and the State Council about the reforms of the state-owned assets management system and SOEs, focused on key aspects, such as reform, adjustment, innovation and management, and done vast amount of down-to-earth and effective work, which has promoted the development of the SOEs and the increase of economic returns by a large margin.
First, deepening the reform provides enterprise development with tremendous driving force. Among all kinds of work, deepening the reform is greatly highlighted by SOEs. Around the central task of development, SOEs energetically promote the joint-stock system reform, improve their corporate governance and deepen the reforms on the labor, remuneration and personnel systems. Profound changes have occurred in enterprise operational mechanism, which provides enterprise development with tremendous driving force. The proportion of the central SOEs and their subsidiaries that have been transformed into joint-stock companies has increased from 30.4% in 2002 to 64.2%. Since 2003, 38 central SOEs have issued IPOs both at home and abroad. The core-business assets of the large central SOEs in the sectors of oil, petrochemicals, telecommunications, transportation, metallurgy, etc. have been listed on both domestic and overseas stock markets. By the end of June 2007, there were 201 domestically listed companies controlled by the central SOEs, accounting for 26% of all listed companies on China's mainland. They totally issued 335.68 billion shares of stock, accounting for 20% of all the shares of stock issued by all listed companies on China's mainland. And their total market capitalization and circulating market capitalization accounted for 26% and 24% of that of the total respectively. On the Hong Kong stock market, there are 68 listed companies controlled by the central SOEs. And the total volume of circulating shares and their circulating market capitalization accounted for 27.7% and 28.6% of all the listed companies in Hong Kong respectively. Many listed companies controlled by the central SOEs have become the backbone of the blue chip stocks on capital markets. 19 central SOEs including the Baosteel Group Corporation, Shenhua Group Corporation Limited, etc., carried out the pilot program of setting up standardized Board of Directors (BOD) according to the Company Law. And 16 of them have set up the BODs in which the number of external directors is more than half of the total number of all directors. They realized the separation of decision-making from execution and improved their corporate governance. The central SOEs accelerated the reform on the labor, remuneration and personnel systems. At present, around 30% of the managerial talents in central SOEs are recruited through market-oriented measures. A group of enterprises set up a sound and effective mechanism, in which the managerial talents are publicly recruited from the market, all the employees take up jobs through competition, performance assessment is quantified, the last will be removed and the remuneration is linked with the performance.
Second, structural adjustment adds new vitality to enterprise development. Around the central task of making the core businesses stronger and bigger, the SOEs actively carry out adjustment and reorganization, condense management chains and separate and transform their non-core businesses. The development of enterprises shows new vitality. On the basis of clarifying their core businesses, the central SOEs regard the market as the guide while focusing on optimizing the allocation of resources, making their core businesses stronger and bigger, and enhancing the adjustment and reorganization. Since the establishment of SASAC, there have been 43 reorganizations involved with 81 central SOEs. The total number of the central SOEs has shrunk from 196 to 155. A batch of scientific research institutes were consolidated into industrial groups, realizing the combination between production and research, improving the ability of technological innovation for those enterprises. Some excellent enterprises consolidated with each other, forming large enterprise groups with strong comprehensive competitiveness. Some ‘Window Companies' which are registered overseas but without substantial business, were acquired into large-size key enterprises, improving the ability of expanding the businesses and competitiveness for those enterprises in overseas markets. Some enterprises which are relevant to each other along the industrial chain were reorganized together, promoting the consolidation of the business chain for the central SOEs and bringing the coordinative and complementary effects into full play. Through the reorganization, some enterprises with difficulties turned losses into gains and got out of difficulties, displaying new vigor. Many central SOEs separated and reorganized their non-core businesses, improving their competitiveness of core businesses. In recent years, the central SOEs enhanced the adjustment of their internal organizational structure, sorted out various investments, condensed their management chains and actively promoted the separation and transformation of their non-core businesses. At present, the majority of the enterprises have preliminarily condensed their managerial layers within three levels, optimizing the allocation of enterprise resources and further improving their overall strengths.
Third, technological progress creates new growth-points for enterprise development. Focusing on industrial development and market demands, the SOEs energetically promote self-innovation, further increase the investment in scientific research and development, explore a batch of new technologies and products with internationally or domestically leading standards, providing the structural adjustment and industrial upgrading with powerful technological support and creating new growth-points for the development of enterprise. By the end of 2006, the central SOEs have possessed 35,970 valid patent rights. China Petroleum & Chemical Corporation, China South Industries Group Corporation and China National Petroleum Corporation respectively applied for more than 1000 patent rights. During these years, the central SOEs won a lot of awards of the National Prize for Progress in Science and Technology. In 2006, the central SOEs won 64 awards of the National Prize for Progress in Science and Technology, accounting for around one third of the total. Out of all the awards, the only one Special Prize was won by the Jian-10 Fighter Plane Project initiated by China Aviation Industry CorporationⅠ. A group of technological innovation achievements acquired by the central SOEs greatly contributed to the construction of China's national defense and other key projects. The Shenzhou series spacecrafts' sending human beings to the outer space has become a new model of China's collective innovation. Technological innovation achievements acquired by the central SOEs have played important roles in the constructions of Qinghai-Tibet Railway, Three Gorges Project, Olympic Games Stadiums and so on, making outstanding contribution to China's key important landmark projects.
Fourth, enhancing management lays solid foundation for enterprise development. SOEs actively promote managerial innovation, enhance the management on property right, finance, capital, cost and strategic planning, enhance the management on the whole process of investment and energetically carry out the work of energy conservation and consumption reduction. In dealing with the situation that the central SOEs have a broad managerial scope but their parent groups are weak in controlling power, they adopted proactive measures to enhance the controlling power of their parent groups and improve their ability of resisting against risks. The phenomena of careless investment, randomly granting guarantees for others and arbitrarily lending loans to others were basically restrained. The pattern of enterprise management was gradually transferred from extensive to intensive. The managerial ability of the central SOEs has been greatly improved.
The reason why SOEs reform and development acquired encouraging achievements in recent years should be owed to the correct leadership of the Central Committee of the CPC and the State Council, should be owed to the efforts actively made by the SOEs, and should be also owed to the improvement of the state-owned assets management system as well as the enhancement of the supervision on state-owned assets. The practice of the reform has fully proved that the decision of the 16th CPC National Congress on reforming the state-owned assets management system is absolutely correct. It has also proved that the principles of combining rights with obligations and duties, and administering assets, personnel and other important affairs together are correct. There is no necessary connection between the ownership and whether an enterprise can run well or not. So long as we follow the rules of enterprise development, the SOEs are bond to run well. |
