Private Capital and Reform of State-Owned Enterprises
In my opinion, two points in the Guidelines deserve our recognition.
First, it continues to take the development of mixed economy as the goalof China’s economic system.Itupholdsthe dominance of public ownership, give full play to the leading role of the state-owned sector, and encourages state-owned enterprises, collective enterprises and private enterprises to develop together through cross holding and mutual fusion.I think this is a point well made, as it highlights two basic directions – shareholding reform and market economy.
Strictly speaking, the idea of mixed economy is not new. In the 1980s when the reform of SOEs was just launched, we put forward the notionof transforming state-owned enterprises into share-holding companies. At that time, the Chinese people understood very little about the shareholding system.Some Western academics equal shareholding reform with privatization. As a result,for a timethe goal of the reform was also expressedasownership diversification.Later on,as state-owned enterprises were reorganized and went publicandas the securities market developed, the goal was definedas diversification of social investment and securitization. Now the Guidelines provide a new expression, that is, the development of mixed ownership. Although these expressions differ in their wordings, the idea is the same.
In practice, the development of mixed economyvaries from place to place. In some localities, transforming state-owned enterprises into ones with mixed ownership was completed ten years ago.On a national scale, however, pressing ahead with such reforms still makes sense, especially forcentrally administered enterprises and state-owned monopolies. The central government’s statement of developing mixed ownership suggests that the goal of ownership diversification remains unchanged. This provides an important basis for further reforming the SOEs.
Second, itadvocates improving thestate-owned assets management system so thatit can be transformed from asset management to capital management. This represents a huge leap in both theory and practice for the reform of SOEs. If the role of SASAC can be changed from managing enterprises, their staffing, operations and assets into managing capital, it will truly be a major breakthrough in the reform of the state-asset management system.
The above-mentioned two goals not only provide the direction and basis for the reform of SOEs, they also create tremendous opportunities for the development of private businesses. Private capital will play an increasingly important role in China’s economic development and SOE reform.
First, private capital isa binding force for the mixed ownership reform. The participation of private capital and social capital will open up the channels for the integration of capital from different economic sectors. As a result, the public sector and non-public sector will be intermingled and provide financial support for the mixed ownership reform.
Second, private capital is a bridge for state-asset management to transition from managing assets to managing capital.Private capital can exploit their advantages in the capital market and the investment chain to help state-owned capital in terms of equity operation, value management and capital flow. Thiscan be achieved through various methods, especially through equity investment funds. It will contributeto the free flow of state-owned capital, better preserve and increase its value, and facilitate the transformation from managing assets to managing capital.Without equity investment from private and social capital, it would be impossible for thestate-ownedassetstobe turned into capital and securities for market trading; and it would also be impossible for state-asset management to be transformed into managing capital.
When we talk about the tremendous opportunities for private enterprises, it is only a theoretical hypothesis. In practice, however, over the past few months since the release of the Guidelines, private businesses were not as enthusiastic about taking part in the SOE reform as we had expected. Some well-known entrepreneurs even publicly talk about their refusal. So far, the private and socialequity investment funds have been lukewarm to the opportunities of investing in state-owned enterprises and developingthe mixed economy. Why is this the case? As I see it, the problem does not lie in the private or social capital themselves. Nor should it be attributed to the lack of funds. Instead, it is the inadequate understanding as well as poor theoretical and policy preparation for the SOE reform that is to blame.Therefore, to give full play the role of private capital in the SOE reform, we need tostraighten out the issues inour thinking and create an enabling environment for private and social capital to participate in the SOE reform. Only in so doing can we facilitate the development of mixed ownership and achieve the transition from asset management to capital management.