The SOE reform in China
Zhou Dayong
Summer semester 2003
Europa-University Viadrina,Germany
Abstract:
The essay tries to study the process of the state-owned enterprise (SOE) reform in China. Chinese economic reform resulted in significant influences on all social aspects, SOEs as an especially economic sector suffers a change both in internal management as well in the outside economic environment. I try to discuss in the essay, that the Chinese SOE reform has made large progress, however, SOE can’t conquer many problems by itself, the resolution of SOE lies in elimination of SOE by a further reform including property transition and construction of a fairer market.
Outline
1. History of the SOE reform in China
2. The main problems left in the reform
3. The reasons of SOE problem behind
4. Argue of some reform plans and suggestion
5. Conclusion
1. The history of the SOEs reform in China
1.1 the establishment of SOE
In 1949, the Chinese Communist Party (CCP) came into power in Mainland China. One goal of the CCP was to lead China into a modern socialism society. In economic scale, it meant mainly industrialization. According to CCP’s policy, the form of industrial organization must be based upon state owned enterprises. The state-owned industrial system was set up by two ways. One was the new enterprise after the liberation. At the end WWII, most industrial sectors in China, such as communication network, transportation and power industry were destroyed and had to be rebuilt, at the same time, military industries and financial sector e.g. banking system was directly nationalized from the former control of Gongmin Party. Another way was transformation from the private ownership to state-owned enterprises. The private properties were regulated under state management, in some cases, for instance in commercial scale, the former private enterprises were bought by local government gradually. Till 1952, about 83% of industrial companies were controlled by the state; a socialism economic system was announced established. (Fig 1)
1.2 The reform began from 1978
Until Chinese economic reform began in 1978, public ownership in forms of state-owned and collectivized were only legal ownership of property. In industrial sector, the enterprises were controlled respectively under central or local governments, the latter made decisions for the enterprises, the enterprises were not profit seeking economic entities, they were simply workshops to execute centrally set policies.
In 1970s, the discontent of economic situation accumulated constantly, because the defects of central planning system became obviously more and more. Around 1978, the rural reform took place from grass roots and spread quickly, till 1982, the collectivized people commune had to be abolished. In company with the reform, the free market in a certain degree was developed. At the same time, the problem of lack of autonomy in SOE, which led to low efficiency, was also taken into account. Therefore, from 1978 on, the Communist Party, under the leading of Deng Xiaoping, put hand to solve the SOE problem. From 1978 to 1984, the efforts of the reform concentrated on giving the SOEs more autonomy by allowing them increased authority over the allocation of their profits, and limited production autonomy. The rest profits could be used either to finance increased investments or to pay bonuses to employees. Besides, administrative control over SOEs was decentralized to local governments. But as the prices were still centrally determined and SOEs did not realize the cost of their fixed and working capital, the reforms did not improve much the resource allocation or the utilization of capital. (1)
1.3 Contract is the main form in the second phase.
From 1985 to 1992 was the second phase of the SOE reform. The policy named Zhenqi Fenkai (separating government from enterprises), the central government decided to turn SOEs into truly independent production and management entities, and stipulate that enterprises must take responsibilities for their own profits and losses by means of contracts and leasing. The common practice was: the enterprises sign a manage contract with the responsible authorities. Under the contract, enterprises were not only allowed to retain the extra profits after they had fulfilled the contracted quotas, but also allowed to arrange their own manage including dismiss or enroll personnel. By the end of 1987, about 80% of state-owned industrial enterprises adopted the contracts system. In 1991, over 90% of the previously contracted enterprises signed the second round of contracts. Meanwhile, based on the first round contract practice, the content of the contract was improved; the authority introduced more rational norms to examine the fulfillment of contract. A multiple index system was formed, which included economic efficiency index, development potentiality index and management index etc.
During this period, the practice of shareholding reform appeared as well. This new creature was adopted at first by village enterprises, which come from the former collective enterprises. The village enterprises were always short of capital, so they raised money from the village residents. Along with the reform moved forward from countryside to cities, the shareholding system was also introduced into SOE reform. Early in April 1984 Chinese reform committee organized a seminar to discuss the exploitation of shareholding in SOE reform. That conference drew a conclusion that shareholding system is a rational way to restructure the collective and state owned enterprises in cities. In July the same year, the first shareholding company after Chinese liberation—Beijing Tianqiao department store (shareholding) came onto horizon. Till 1991, there were already 709 state owned enterprises restructured along shareholding system. These enterprises included industrial sector companies, trade companies, also financial enterprises, construction enterprises etc.
Besides, in the second phase of SOE reform, tax system had also a great change. Instead of handing in profit, SOEs paid a certain portion of tax according to their revenue level. The State and local government collected tax separately; this measure was implemented to loose the relation between SOE and local authority.
However, during this period, the SOEs showed their weakness in competition with the new developed private companies, joint venture companies and township and village enterprises, because at one side, the manager of SOEs didn’t get use to do business in a free market, the attitude of waiting, relying on government and begging for help were widespread. At another side, the relationship between government and enterprises became more complicated, because, although under the contract system, the government have no right to interfere in the SOEs management, they still rely on each other: the government need the SOE to have good performance in order to settle surplus labor forces and continue to play a role in maintain the social stability, at the same time, to increase the government’s revenue to deal with the raising infrastructure investment and other expense. The SOE, on the other side, need the protection of the authority, in order to obtain more chance to get loans, subsidizes or orders in government arranged projects. Besides, even though most of direct subsidies form the state have been cancelled, many domestic savings were also channeled into SOEs, because banks had been directed to take up the role of making "loans" to SOEs instead of the state. The total of non-performing loans has grown so large that it started to endanger the banking system. (2)
1.4 The MES is the key point in the third phase of the reform and the achievements
Form 1993 on, the reform moved into the third phase, the aim called setting up the modern enterprises system (MES). The Third Plenary Session of the 14th Party Central Committee in November 1993 proposed: "It is the inevitable request for market economy to set up modern enterprise system, it is a direction of the SOE reform of China. "This indicates that SOE reform enters a new stage of system innovation. In 1994 the State Council determined to chose 100 state-run large and medium-sized enterprises to launch an experiment to implement restructure along MES. The basic demands of the experiment were to "define right and responsibility clearly, separate government function from enterprise management, and operate scientifically”. Those requirements were in fact the basic characters concerning modern enterprises system. Along the policy of building MES system, and based upon the development of the whole economy, there were many achievements reached in the third phase.
1) By 2000, most large and middle scale SOEs have set up modern enterprise system tentatively. According to the investigation in 2473 enterprises of State Statistics Bureau 2000, 2016 enterprises have restructured, account 81.5%. Among those enterprises, 603 turned to Co., Ltd., accounts for 29.9%; 713 were restructured to limited companies, accounts for 35.4%; the number of solely state-owned company is 700, accounts for 34.7%. As for their management, 82.2% established shareholders’ meeting, 95.1% established the board of directors, and the board of supervisors has been established in 84.5% of enterprises. Therefore, corporate governance structure has already taken shape in SOEs.
2) In this phase, during" the Ninth Five-Year Plan", China began to adjust the state-run economic layout strategically, The idea called Zhuada Fangxiao (to grab the big ones and let the small ones go). The reform for medium and large SOEs focused on fostering a batch of trans-regional, inter-trade, inter-ownership big SOE groups through reorganizing, transforming, uniting annex. In 1997, the number of national large-scale enterprise groups expands to 120. For instance, under approval by the State Council, China Petrochemical Corporation, China Oil and Natural Gas Corporation were predominated to two large groups, whose assets of enterprise group reached in 40 billion dollars, such measure improved the intensification degree and international competitiveness of Chinese petrochemical industry greatly. Another example was in telecommunication market, six major SOE telecom groups (China Telecom, China Mobile, China Unicom, China satellite communication, China railway communication) were predominated. So a new form of competition in field of communication service took shape.
By the end of 2001, national key enterprises add up to 2710, total assets up to 1,280,450 million dollar. Among 179 super-huge enterprise groups, whose business income is over 500 million dollar, there are 165 state-owned or state-holding enterprise groups.
3) During this phase, separating government function from enterprise management was strengthened harder than before. Chinese government started administrative organization structure reform in 1998. Through this administrative restructure, the departments of the State Council reduced from 40 to 29. At provincial level, government departments reduced from 55 on average to 40, about 20% departments were simply. Some departments were cancelled totally. The cancellation of government departments indicated that the SOE stay in the charge of specialized official department manages changed completely. Meanwhile, the administration rank of the state-owned enterprise were cancelled, some administrative approval procedure were simplified.
4) To relieve the social burden of SOEs, re-employment service center were set up to shunt the redundant staff of enterprises. It has been a great difficult problem of the SOE reform from begin on that enterprises are overstaffed. It is an important measure of revitalizing the SOEs to dismiss and distribute workers. In June 1998, the state council required all regions to set up re-employment service center system. National Ministry of Labor and Social Security emphasized that the laid-off worker in SOEs must 100% enter the re-employment service center. The re-employment service center determined to provide serve functions such as grant basic living cost, withhold social insurance, organize job training and launch employment etc. for laid-off worker. The fund, which used for ensuring laid-off worker's basic life and paying the social insurance premium, come from financial budget, enterprise as well as societies (namely form contribution or from laid-off worker themselves), each part bears 1/3 of the whole fund. The re-employment service center provides service for laid-off workers for at longest 3 years. When they can’t reemploy after this period, can still enjoy unemployment compensation or the society relieve according to relevant regulation.
In this reform stage, re-employment service center played a positive role on maintain social stability. From 1998 to the end of 2001, 25,500,000 laid-off workers emerged (Fig 3) in national state-owned enterprises, among them more than 17 million people were reemployed, more than 3 million people retired. However, re-employment service center was only a transitional institute, because the SOE had to still take responsibility to settle down those laid off workers. According to a new policy, all laid-off workers after 2001 are treat as unemployed and have to enter free labor force market.
5) In order to extricate SOE from predicament, especially to resolve the problem of high liability-asset ratio, by December 2000, 580 SOEs began to implement debt-to-share swap, that mean the enterprises’ debt were recalculated as share (enterprises’ equity), so that the interest burden of SOEs were lightened. In the process, most of unperformed loans would be calculated as shares, which would be gathered and supervised by a new state commission-- State-owned Assets Supervision and Administration Commission (SASAC). Till 2001, the total amount of money of debt-to-equity swap account 40,5 billion dollars, and the result was that the average asset-liability ratio of debt-to-share swapped enterprises dropped from more than 70% to under 50%.
2. The main problems left in the reform
After three steps reform, the SOE acquired more autonomy, as we have seen, the whole economic circumstance were also better. But because the reform did not touch the socialism idea from begin on, thus the transition of ownership of SOE was left basically unchanged, the defects of SOE could not changed completely. In the context of China’s economic reforms, there are still a few problems in SOE sector existed and have also a deep influence.
First of all, the interventions from the government still maintained influence in SOE. The administrative relation between enterprise and government is still remaining. Even the Local State Assets management office was established, it belong to the same bureaucratic system like former authorities. It can appoint or remove senior executives of SOEs. If enterprise applies to the broad structure, the directors in broad are appointed by it. The office has also a say in the transfer of holdings, corporate mergers, closures or other major changes to the enterprises, it is also charged with the tasks of clarifying property rights and settling disputes (3) . It seemed that the state assets supervisory takes the place of former authority above the SOEs. Moreover, the local government maintains still strong power in local enterprise, they rely on each other as we discussed above. So long as the enterprises are state-owned, whether they are big groups, stock companies or little entities, it is difficult to shaking off the directly or indirectly control from the government.
Secondly, because of the long tradition, enterprises are still taking responsibilities for their employees in pension, medical areas, therefore the so-called “soft budget constraint” cannot be given up completely. Although we have discussed that the Chinese government has managed to start re-employment plan, SOEs also take a part of the fund to support the plan. Correspondenly, government had to shoulder some failures resulted from the mismanagement of SOEs’ and avoid from their bankruptcy, in order to prevent the enterprise from bankrupcy and thus endanger the social stability.
Thirdly, the management of SOEs has low quality compare with other economic sectors. Though SOEs have produced an average 10% growth rate in the value of industrial output during the period 1978-98, this rate is considerably below the average of other sectors. The problem has two reasons. One of them is lacking of the inner incentive of the managers. The SOE managers are not entrepreneurs in the true sense, but bureaucrats at any rate. Their appointment by the government not basically according to their managerial capability, but based on their rankings in the bureaucratic hierarchy through the politic system. Another factor concerns the supervision within the SOE, it is also lacking in most cases. In practice, the position of supervisor in a enterprise is normally taken by staff within the enterprise and in most cases, the position of president of the supervision committee is taken by somebody within the enterprise, who is under the leadership of the directors and managers in his ranks both at work and in the Party. This system makes it very hard for the supervision committee to fully perform its authority (4) .
Fourth, the high liability-asset ratio is also regarded as a fatal problem of SOEs. It was observed, that during the reform period, the liability-asset ratio of industrial SOEs rose from around 11% in 1978 to approximately 65% in 1997. In as many as one-fourth of industrial SOEs, liabilities have even come to exceed assets; these enterprises are in fact insolvent. The World Bank suggests that in debt restructuring may be necessary for the most heavily indebted enterprises to bankrupt. After the implement of debt-to-share swap, the ratio decreased, but the debtor, in most cases are banks, didn’t collect the loan back, so it made the SOE even harder to get new loan for production. (5)
Furthermore, the whole process of the SOE reform companied by a serials of social problems, in compare to some difficulties such as lack or reserve labor force, ageing of the equipments, the most troublesome is the unemployment in large scales. In addition, in rural areas, millions of flowing population has been produced because of the bankruptcy and low profitability of the township and village enterprise. In urban China there are frequent reports about workers’ unrest. Although until now China still maintain a relative political stability, the menace will not fade away in a short time.
承德市人民政府办公室关于印发承德市档案征集管理办法的通知
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承德市人民政府办公室关于印发承德市档案征集管理办法的通知
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二〇一一年八月二十二日
承德市档案征集管理办法
第一章 总 则
第一条 为了征集散存、散失的档案，防止档案的损毁和流失，维护档案的完整与安全，保存承德历史记忆，服务国际旅游城市建设和文化大市建设，根据《中华人民共和国档案法》、《中华人民共和国档案法实施办法》和《河北省档案工作条例》以及有关法律、法规的规定，结合本市实际，制定本办法。
第二条 本办法所称档案，是指过去、现在的国家机构、社会组织以及个人从事政治、经济、军事、科学、技术、文化、宗教等活动直接形成的对全市经济和社会发展具有保存价值的各种文字、照片、图表、声像、实物等不同载体的历史记录。
本办法所称档案征集，是指市、县级国家档案馆（以下简称档案馆）依照本办法将散存、散失的档案收集进馆行为。
第三条 本办法由市档案行政管理部门负责组织实施，并对实施情况进行监督检查。
县（区）档案行政管理部门依照职责权限，负责辖区内档案征集工作的管理和监督。
第四条 档案馆负责征集本行政区域内属于本馆保管范围的档案，并建立相应的备案登记制度。
档案馆应设置专门机构或职位负责档案征集工作。
第五条 市、县（区）人民政府应当加强对档案征集工作的领导，将档案征集所需经费列入同级财政预算。
第六条 本市行政区域内的单位和个人，对档案征集工作及对散存档案的备案登记工作应当予以支持和协助。
第二章 档案征集
第七条 散存、散失的具有保存价值的下列档案，应当予以征集：
（一）中华人民共和国成立前特别是清朝、民国、日伪统治时期承德区域内的机构、社会组织等形成的档案；
（二）中华人民共和国成立前后承德区域内中国共产党及其领导的政权机关、武装力量、社会团体、企事业单位形成的档案；
（三）承德籍或在承德战斗、工作、生活过的各界著名人物形成的档案；
（四）承德区域内重点建设工程、重大活动、重大事件形成的档案；
（五）承德区域内的风景名胜区、自然保护区、历史文化保护区、保护建筑、各类遗址档案；
（六）反映承德少数民族历史和少数民族文化的档案；
（七）反映承德民风民俗、社会变迁的档案；
（八）具有承德地方特色的其他档案。
第八条 征集的方式：
（一）接受捐赠；
（二）接受寄存；
（三）代为保管；
（四）收购；
（五）征购；
（六）接受移交；
（七）其他方式。
第九条 档案馆征集档案，应当由2名以上工作人员共同进行。征集档案时，档案征集人员应主动出示表明身份和工作任务的证明文件。
档案征集人员应当自档案征集完成之日起10日内将征集到的档案移交档案馆，档案馆对征集到的档案应当登记造册。
第十条 在征集过程中，对档案的真伪或价值有异议的，档案馆或档案持有者可以将其提请档案鉴定委员会鉴定、评估。
档案鉴定委员会由本级档案行政管理部门聘请具有相关知识的专家组成。鉴定、评估档案工作应由3名以上相关专家共同进行。
第十一条 鼓励单位和个人向档案馆捐赠档案。
接受捐赠的档案馆，应当向捐赠者颁发捐赠档案荣誉证书。
捐赠档案的单位和个人，对其捐赠的档案有优先和无偿利用的权利，并可对所捐赠的档案中不宜向社会公开的部分提出限制他人使用的意见，档案馆应当维护捐赠者的合法权益。
第十二条 属于集体、个人所有以及其他不属于国家所有的档案，档案所有人可以在档案馆寄存。接受寄存的，档案馆与寄存人应当签订档案寄存书面协议。
第十三条 属于集体、个人所有以及其他不属于国家所有的档案，档案所有人可以向档案馆出售。档案收购价格，由档案馆与出售人协商确定。
前款所述档案，其所有人向档案馆以外的单位或者个人出售的，应经县级以上人民政府档案行政管理部门批准。
第十四条 属于集体、个人所有以及其他不属于国家所有的档案，由于保管条件恶劣或者其他原因可能导致档案严重损毁、灭失、丢失的，档案馆有权采取代为保管措施。
采取档案代为保管措施的档案，档案馆应当向档案所有人出具代为保管凭证，并不得收取代为保管的费用。
公布或者提供他人利用代为保管的档案，档案馆应当征得档案所有人的同意。
第十五条 属于集体、个人所有以及其他不属于国家所有的档案，由于保管条件恶劣或者其他原因可能导致档案严重损毁、灭失、丢失的，所有者不愿向档案馆捐赠、寄存或者出售的，档案馆可以征购。征购档案的价格由档案鉴定委员会评估确定。
第十六条 征集范围内的档案，属于国家所有的，档案持有人必须按照有关法律、法规的规定，向档案馆移交。
国家所有的档案，禁止出售或者非法转让。
第十七条 举办重大政治、经济、科学、技术、文化、卫生、体育、外事、宗教等活动，组织和承办单位应将活动中形成的材料收集整理齐全，并按照《承德市重大活动档案管理暂行办法》及时将档案材料移交同级档案馆。
第十八条 档案馆可以跨区域或者向境外征集档案。
第十九条 档案馆应当采取有效措施，确保征集进馆档案的安全。
第三章 奖励与处罚
第二十条 捐赠重要和珍贵档案或为档案征集工作做出重要贡献的，市、县（区）人民政府给予表彰和奖励。
第二十一条 档案征集人员将征集的档案据为己有的，由县级以上人民政府档案行政管理部门责令其移交档案馆，并依法给予行政处分；造成损失的，依法赔偿损失；构成犯罪的，依法追究刑事责任。
第二十二条 违反本办法第十一条第三款、第十四条第三款规定，给档案所有者造成不良影响或者损失的，档案馆应当消除影响，赔偿损失，并依法给予直接负责的主管人员或者其他直接责任人行政处分。
第二十三条 违反本办法第十六条第一款规定不移交属于国家所有的档案的，由县级以上人民政府档案行政管理部门责令其限期移交；逾期拒不移交的，由县级以上人民政府档案行政管理部门申请人民法院强制执行。国家工作人员持有国家所有的档案拒不移交的，由有关主管部门给予行政处分，同时将处理结果告知同级档案行政管理部门。
第二十四条 违反本办法第十六条第二款规定，擅自出售或非法转让国家所有档案的，由县级以上人民政府档案行政管理部门依法给予警告，并可以根据相关档案价值和数量，处以一千元至五万元罚款；有违法所得，没收违法所得，并可以依法征购所出卖的档案。
第四章 附 则
第二十五条 本办法适用中的具体问题由市档案局负责解释。
第二十六条 本办法自发布之日起施行。
