Q: Except for a very small proportion of mega-companies
run exclusively by the State, more than 80 percent of China's SOEs
have gone through shareholding reform. What are the ways to realize
shareholding reform? Why is the shareholding system the major form
of public ownership?
A: In the process of reforming SOEs, China began to realize that
more effective forms of public ownership must be explored in order
for SOEs to regain their vitality. Implementing a shareholding
system and developing a mixed ownership is nothing but a step in
this direction.
In the 1980s, immediately after the introduction of the
shareholding system and especially after it was adopted in
reforming SOEs, China was hit by a wave of shareholding fever. The
experiences of several provinces and municipalities have proven
that shareholding is an effective system to manage enterprises. In
1993, the Chinese Government made it clear that establishing a
modern corporate system was the direction of SOE reform. Since
then, China has accelerated shareholding reform.
Except for a small number of companies, such as military
factories, SOEs including mega-companies have been encouraged to
bring in foreign and private investors, getting listed overseas if
conditions permit, and performing mergers and acquisitions so to
optimize ownership structure.
?
According to a survey conducted by the National Bureau of
Statistics on 4,371 key state SOEs, before 2001, 3,322 or 76
percent of surveyed companies had initiated reforms to set up a
shareholding system or corporate mechanism. More than half of them
had diversified property ownership and at least 90 percent of the
newly founded companies were shareholding companies.
?
Despite the achievements SOEs have made in the shareholding reform,
big SOEs in highly competitive sectors are making relatively slow
progress in implementing such reform. Major reasons include the
overwhelming proportion of State-owned assets, heavy debt burden,
imbalanced capital structure, and low profitability, lack of a
dominant business scope, redundant labor force and the
unpredictability of reform potentials. All these factors have
combined to deter large number of potential investors to step
in.
The shareholding system, as a capital structure of modern
enterprise, is conducive to separating ownership from management
rights, as well as to improving capital utilization and company
efficiency. Thus, the shareholding system can be adopted in both
capitalist and socialist countries.