China to develop world-leading, internationally dominant SOEs

[TaiShang]

China to develop world-leading, internationally dominant SOEs

Source: Xinhua Published: 2018/4/21

China will step up efforts to develop a group of state-owned enterprises (SOEs) with international dominance and influence, the chief of China's top SOE watchdog said Saturday.

The goal includes having a group of leading SOEs that are dominant in international resources allocation, Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission, said at a forum on the reform and development of Chinese enterprises.

China also aims to have a number of SOEs with leadership in global industry and technology development, and increase the number of SOEs with a say in global industry development, he said, calling the mission "more urgent" than before.

Chinese SOEs have significantly increased their scale, power, and competitiveness since the reform and opening-up which began 40 years ago, he said.

Official data showed total SOE assets stood at 163.6 trillion yuan (around 26 trillion US dollars) at the end of February, and SOEs reported solid profit growth in the first two months of this year, raking in 367.3 billion yuan with a 25.3 percent year-on-year increase.

Three of the top five Fortune 500 Companies in 2017 were Chinese SOEs.

The country will deepen reform of SOEs and ramp up efforts to establish institutions and mechanisms that are in line with the market economy, Xiao added.

"SOEs should be more open and enhance exchanges and cooperation with private companies at home and abroad for win-win cooperation," he said.

http://www.globaltimes.cn/content/1099040.shtml

 

[Huan]

China to develop world-leading, internationally dominant SOEs

Source: Xinhua Published: 2018/4/21

China will step up efforts to develop a group of state-owned enterprises (SOEs) with international dominance and influence, the chief of China's top SOE watchdog said Saturday.

The goal includes having a group of leading SOEs that are dominant in international resources allocation, Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission, said at a forum on the reform and development of Chinese enterprises.

China also aims to have a number of SOEs with leadership in global industry and technology development, and increase the number of SOEs with a say in global industry development, he said, calling the mission "more urgent" than before.

Chinese SOEs have significantly increased their scale, power, and competitiveness since the reform and opening-up which began 40 years ago, he said.

Official data showed total SOE assets stood at 163.6 trillion yuan (around 26 trillion US dollars) at the end of February, and SOEs reported solid profit growth in the first two months of this year, raking in 367.3 billion yuan with a 25.3 percent year-on-year increase.

Three of the top five Fortune 500 Companies in 2017 were Chinese SOEs.

The country will deepen reform of SOEs and ramp up efforts to establish institutions and mechanisms that are in line with the market economy, Xiao added.

"SOEs should be more open and enhance exchanges and cooperation with private companies at home and abroad for win-win cooperation," he said.

http://www.globaltimes.cn/content/1099040.shtml

For versatility and flexibility and robustness, it is good to have both a mix of private companies and State-Owned Enterprises side by side in the operations of China's growing economy. Never throw away State Own Enterprises for the sake of extreme ultra market liberalization like in the slow or slightly stagnant Western economies. Maintain a hybrid economy model.

 

[powastick]

For versatility and flexibility and robustness, it is good to have both a mix of private companies and State-Owned Enterprises side by side in the operations of China's growing economy. Never throw away State Own Enterprises for the sake of extreme ultra market liberalization like in the slow or slightly stagnant Western economies. Maintain a hybrid economy model.

Is call selling your assets until the government is broke. Sure is good in short term, but have consequences in the long term. Eventually the government can't pay, private banks and enterprises comes in and take over the country. This is what happen to post Soviet, oligarch have taken over and stagnated.

 

[TaiShang]

For versatility and flexibility and robustness, it is good to have both a mix of private companies and State-Owned Enterprises side by side in the operations of China's growing economy. Never throw away State Own Enterprises for the sake of extreme ultra market liberalization like in the slow or slightly stagnant Western economies. Maintain a hybrid economy model.

Definitely agree. I do not see China throwing hard-found SOEs under the bus for the sake of appeasing certain market fundamentalists and neoliberal fanatics.

Instead, China has long begun to inject market rules while maintaining public ownership, starting in the late 1990s with its energy companies. Now, reform is being extended to all sectors of SOE.

Is call selling your assets until the government is broke. Sure is good in short term, but have consequences in the long term. Eventually the government can't pay, private banks and enterprises comes in and take over the country. This is what happen to post Soviet, oligarch have taken over and stagnated.

If the government is corrupt, it will fire-sale SOEs to balance the budget and give it a pretty name such as liberalization or injecting competitiveness. In fact, mostly in developing countries, such fire-sale of national assets are done under political pressures, domestic and foreign.

As you say, it happened in the early 1990s in Russia and has been happening throughout developing world. That's, in a sense, what Washington Consensus is all about: Taking away your sovereignty.

 

[Yingluck]

The alternative will be oligarch ruling the country. Well done China.

 

[TaiShang]

The alternative will be oligarch ruling the country. Well done China.

China did many things right. But it did certain things wrong due to miscalculation or outright ignorance, as now seen in the whole ZTE saga.

There were/are too many free market fundamentalists who believed in global interdependency. Hence, they have advised opening up national markets for, say, chips, instead of doing the hard and expensive work of producing one's own.

Those free market religio-fundamentalists advised that international trade rules and the invisible hand would never let a profit oriented company in the US to stop selling advanced tech to ZTE, killing its own cash cow.

Well, as it happens, they were wrong. National interest has proven to be stronger than the bloody invisible hand.

Those free market fundamentalists who let what happened today to happen need to be shot dead on spot, like German colonialists used to do in Shandong in the form of street executions.

If Trump did not ring the alarm bells, these people in the academia and some public offices would find and convince their audience unhindered.

If people in China's academia and governance today still sincerely believe in and advocate neoliberal free market (other than using it as a strategic tool of diversion and hiding real intentions to fool and soothe the enemy) and passing actual laws to further weaken China's economic sovereignty, they are outright domestic enemies.

(Nonetheless, I should point out, what China has been doing right is more than it is doing wrong. We need to keep in mind that the reason Trump had to kill neoliberal illusion was merely because of China's Made in China 2025. Thus, now the policy becomes even more important for China. More money, effort and investment should be directed at it. Made in China 2025 is China's manifest destiny, if fails, nation building fails)

@Cybernetics , @Chinese-Dragon , @Jlaw , @AndrewJin , @GS Zhou

 

[Götterdämmerung]

Those free market religio-fundamentalists advised that international trade rules and the invisible hand would never let a profit oriented company in the US to stop selling advanced tech to ZTE, killing its own cash cow.

There is certainly an invisible hand in the game, or should I say invisible hands. These hands are the money dynasites that never appear on Forbes' shortlist of the richest people.

 

[Cybernetics]

China did many things right. But it did certain things wrong due to miscalculation or outright ignorance, as now seen in the whole ZTE saga.

There were/are too many free market fundamentalists who believed in global interdependency. Hence, they have advised opening up national markets for, say, chips, instead of doing the hard and expensive work of producing one's own.

Those free market religio-fundamentalists advised that international trade rules and the invisible hand would never let a profit oriented company in the US to stop selling advanced tech to ZTE, killing its own cash cow.

Well, as it happens, they were wrong. National interest has proven to be stronger than the bloody invisible hand.

Those free market fundamentalists who let what happened today to happen need to be shot dead on spot, like German colonialists used to do in Shandong in the form of street executions.

If Trump did not ring the alarm bells, these people in the academia and some public offices would find and convince their audience unhindered.

If people in China's academia and governance today still sincerely believe in and advocate neoliberal free market (other than using it as a strategic tool of diversion and hiding real intentions to fool and soothe the enemy) and passing actual laws to further weaken China's economic sovereignty, they are outright domestic enemies.

(Nonetheless, I should point out, what China has been doing right is more than it is doing wrong. We need to keep in mind that the reason Trump had to kill neoliberal illusion was merely because of China's Made in China 2025. Thus, now the policy becomes even more important for China. More money, effort and investment should be directed at it. Made in China 2025 is China's manifest destiny, if fails, nation building fails)

@Cybernetics , @Chinese-Dragon , @Jlaw , @AndrewJin , @GS Zhou

While markets are important, it is just a tool and a means to an end. Differentiate market/market functions and free markets. It facilitates the flow of information and is the process of price searching, among other market information. While it is possible for a smaller nation to employ a more "free market" policy. A large civilisation state like China can never play such a game, especially during its developmental phase. Foreign state actors would influence markets with state back powers in reaction or anticipation to the displacement from a large entity like China. It is stupid to believe in free markets when the dominant players themselves don't operate in free markets in practice (though markets and trade is good).

In practice large American enterprises don't operate in a free market. They criticise China for state subsidies but American companies receive massive subsidies (though they are clever in framing it), receive large government/military contracts (Chinese firms are sanctioned due to this), and tax deductions (sometimes no taxes). On top of that American government intervenes in market activity including acquisitions and company breakups. There is not such thing as "free markets" in practice and I think it is a bad system. Breaking up of monopolies is essentially an attempt to heal the self created wound that comes from sustained free markets, to preserve proper market functions. Free markets in the long run self destructs and monopolies everything due to the drive for capital efficiency, which can destroy macro dynamics and the underlying society.

Often there are competing voices supporting SOEs or privatisation, when in practice both serve vital functions. A hybrid system combines robustness, long term organisation, and efficiency.

Fortunately Chinese leadership is composed of people from STEM field, they take a very fundamental, a physics like view of the economy and development. Their framework of thinking is different from conventional models. In China capital doesn't have inherent rights over the state, it is just seen as a tool.

 

[TaiShang]

Fortunately Chinese leadership is composed of people from STEM field, they take a very fundamental, a physics like view of the economy and development. Their framework of thinking is different from conventional models. In China capital doesn't have inherent rights over the state, it is just seen as a tool.

That's refreshing, indeed. Because, the other option is destructive neoliberalism with an option for neofascism, if liberalism falls into crisis.

So far China has defined a number of conventional Western development theories. Perhaps the crises, or appearance of crises are the minor road block rather than existential threats.

In practice large American enterprises don't operate in a free market. They criticise China for state subsidies but American companies receive massive subsidies (though they are clever in framing it), receive large government/military contracts (Chinese firms are sanctioned due to this), and tax deductions (sometimes no taxes). On top of that American government intervenes in market activity including acquisitions and company breakups. There is not such thing as "free markets" in practice and I think it is a bad system. Breaking up of monopolies is essentially an attempt to heal the self created wound that comes from sustained free markets, to preserve proper market functions. Free markets in the long run self destructs and monopolies everything due to the drive for capital efficiency, which can destroy macro dynamics and the underlying society.

I wonder why developing countries cannot devise such clever tactics in an effort to seem like playing by the book? Part of the answer could be lack of capacity to create such illusion. The other is, maybe everybody is aware of the game, but there is huge power disparity.

International trade rules are perhaps part of the rules of the jungle.

There is certainly an invisible hand in the game, or should I say invisible hands. These hands are the money dynasites that never appear on Forbes' shortlist of the richest people.

Invisible hand was supposed to be lack of a hand, actually. In this case, the hand is invisible to the ignorant only, and actually, there are many invisible hands, not just one. Then, it is definitely not a free market.


***

Central SOEs to seek M&As

By Chu Daye Source:Global Times Published: 2018/4/22

An employee works at a Sinopec gas station in Southwest China's Yunnan Province in February. Photo: IC

China's centrally administered State-owned enterprises (central SOEs) are expected to see more mergers and acquisitions (M&As), particularly in the fields of key strategic industries, environmental protection and shared technology platforms, domestic news site cnstock.com reported over the weekend.

M&As will for a certain period of time became the hub of the reform and development of China's SOEs, according to cnstock.com, citing a report published on Saturday by the research center under the State-owned Assets Supervision and Administration Commission (SASAC).

An expert said on Sunday that the projection came at a time when central SOE reform is well underway and the country's central SOEs are in a critical phase for grasping the drivers of growth in the future.

"Many of the central SOEs are in heavy industrial sectors such as oil, steel, coal and autos, and they have grown to a very large size, even achieving 'too big to fail' status," Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times.

"However, the modern economy compels these central SOEs to leverage their strength in scale to achieve leading status in more innovative industries via investment," Dong said on Sunday, referring to the sectors mentioned in the cnstock.com report.

Dong said that in the next stage, the task for central SOEs will be to continue to be lean and competitive while locating new growth drivers and using their strength in scale and branding.

After years of reform measures aimed at improving efficiency and shutting down chronically loss-making "zombie firms," the central SOEs have seen a brisk improvement in their competitiveness and profitability.

In the first quarter, central SOEs recorded a profit rise of 20.9 percent year-on-year to 377.06 billion yuan ($60.03 billion), SASAC said on April 16.

Also, the average debt-to-asset ratio dropped to 65.9 percent by the end of March, 0.4 percentage points lower than at the beginning of 2018 and in line with the stated goal to cut the ratio by 2 percentage points by the end of 2020.

Since the reform was launched in September 2015, high-profile mergers among central SOEs have reduced the number of such conglomerates from nearly 110 to 97, according to the SASAC website on Sunday.

Caution needed

However, Feng Liguo, an expert at the China Enterprise Confederation, said that the report by the SASAC research center does not necessarily reflect what SASAC will or will not do.

"Moving into new sectors that are different from the company's main business may happen for a small number of SOEs, but this cannot be a widespread trend," Feng told the Global Times on Sunday.

"Although there has been some success in deleveraging, the debt-to-asset ratio at central SOEs remains elevated and investing in new areas is likely to further increase the ratio," Feng said.

Also, many central SOEs have crossed into other sectors in recent years, such as energy companies making large investments in new energy, but the results have been mediocre, Feng noted.

The ultimate goal for central SOEs in the future should be higher-quality growth, as stated by the central government, Feng said.

"Central SOEs have zero advantage in exploring sectors that are utterly new," Feng warned.

 

[Cybernetics]

That's refreshing, indeed. Because, the other option is destructive neoliberalism with an option for neofascism, if liberalism falls into crisis.

So far China has defined a number of conventional Western development theories. Perhaps the crises, or appearance of crises are the minor road block rather than existential threats.

Since China doesn't have neoliberalism as an ideology, it views it from a generally neutral perspective (but not benign). There will always be dormant neoliberals but overt and overreaching neoliberals that hurt national interests would be dealt with, there isn't a national ideology supporting their actions thus seen as traitors. These people would be used to facilitate market functions but generally understands their limitations. The precondition for that limiter is the state structure, the fundamental view of development, along with other Chinese ideologies that goes beyond the surface ones.

I don't think China can truly rise without facing major crises. Anything can eventually lead to existential threats, how you react to them are important. Crises are essential systemic shocks to mould a nation, a reason why I previously mentioned "contact points" and maintaining the ability to support them.

I wonder why developing countries cannot devise such clever tactics in an effort to seem like playing by the book? Part of the answer could be lack of capacity to create such illusion. The other is, maybe everybody is aware of the game, but there is huge power disparity.

International trade rules are perhaps part of the rules of the jungle.

Devising and implementing an cohesive and systemic "illusions" requires substantial social surpluses and strong institutions (with great knowledge capacity) to support what is essentially an advanced service sector. Developing nations (individually) just have a hard time supporting this system though can have success in certain areas. The US economy can support a trillion dollar legal system and a massive financial system, the surpluses supports people who essentially interpret the law and find loopholes for their clients. Such a burdensome system could collapse a developing nation or make life difficult through relatively high living costs due to distortions in the economy.

There are certain ways developing nations can mitigate their shortcomings but the only robust and broad solution to support a system for the purpose of devising "clever tactics" is to automate agriculture and industry. Maybe AI can help in the future in lowering the surplus requirements to support such a system. In the meantime, educating an elite population that is highly aware and embedded in the international system can be a solution.

Essentially find sustainable surplus to support such a system and embedded into the body that writes the rules.

Who writes the international rules? Those with hard power.