According to a report from the Wall Street Journal,"China's Reform Plan treads softly on China's biggest state-owned companies, who many say are rife with overcapacity, corruption and distortions that disadvantage private-sector players. The aim seems to be not to loosen the grip of the state-owned enterprises to create a level playing field, but to make them work better to maintain the Communist Party's hold on power".
There was no initiative to reduce the role of state-owned enterprises in the economy, as some hoped.
There was no initiative to reduce the role of state-owned enterprises in the economy, as some hoped.
"Not all is lost. The plan envisions state-owned companies boosting dividends so that 30% of after-tax profit—up from around 15%—goes to the government purse by 2020. Much of that income would be redistributed to households, rather than kept bottled up with bloated state companies.
The national social-security fund could gain cash and end up with larger equity stakes in companies. While still cozy, a government fund serving as a shareholder with a motivation to boost profit rather than conduct policy would be an improvement".
"Broader reforms, if implemented, will attempt to make state-owned companies more efficient and profit-oriented".
"Elimination of price controls on commodities could clear out unneeded players and remove supply bottlenecks.
State-owned enterprises make up more than 80% of the value of Chinese-listed companies, so exposure to Beijing's policies are part of the game.
Much will hang on whether the reform plans are followed through with actions".
