A Transcript of Reform
China Africa (English)|March 2020
State-owned enterprises are being vitalized by recent reform measures
Zhang Shasha
A Transcript of Reform

Every January, Chinese central state-owned enterprises (SOEs) hold doz-ens of work conferences to map out plans for the new year. Employee stock ownership, mixed-ownership reform, reshuffling, innovation and reform are the buzzwords at this year’s meetings.

ChemChina and Sinochem Group, two central SOEs, announced the merger of their agricultural assets on January 5. The move is expected to not only integrate the two SOEs’ industrial chain, but also change the landscape of China’s agricultural and chemical industry.

China Electric Power Research Institute (CEPRI), a scientific enterprise under the state-owned electric utility company State Grid, started a dividend policy in 2017, a year after the government issued a document to encourage corporate dividends in scientific research-related areas.

“The incentive stabilized the researchers as the retention rate of core talent has increased to 98 percent since 2018,” Wang Jiye, Vice President of CEPRI, said. “The earnings are correlated to scientific payoffs, which is conducive to generating new technologies.”

Employee stock ownership has been initiated in mixed-ownership enterprises, with government capital holding the majority shares and employees purchasing equity and pledging assets, tying up their personal benefits with corporate development. Thus, the SOE salary system has been stably optimized since income is now associated with productivity and economic benefits.

These measures are medium- and longterm incentives that SOEs adopted to stimulate endogenous power as part of overall SOE reform. In recent years, SOE reform has made consistent progress. In 2019, the net margin of central SOEs was 1.3 trillion yuan ($185.2 billion), up 10.8 percent year on year.

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