China will push further reforms of state-owned enterprises and state capital to enhance strength, efficiency, and scale, the state planner says

China will push further reforms of state-owned enterprises and state capital to enhance strength, efficiency, and scale, the state planner says

China Advances State-Owned Enterprise Reforms to Boost Efficiency and Global Competitiveness

China’s National Development and Reform Commission has announced a new phase of reforms targeting state-owned enterprises (SOEs) and state capital, aiming to enhance their strength, efficiency, and scale. These measures align with broader efforts to modernize the economy and position SOEs as globally competitive entities.

A central focus of the reforms is the mixed-ownership model, which allows private and foreign investors to acquire stakes in SOEs. This approach seeks to inject market discipline, improve governance, and reduce inefficiencies. By 2020, over 75% of SOEs had adopted mixed-ownership structures, with strategic sectors like energy and telecommunications retaining significant state control. The government emphasizes a “grasp the big, release the small” strategy, consolidating large SOEs while streamlining smaller ones through privatization or asset sales.

Corporate governance reforms are also critical. The State-owned Assets Supervision and Administration Commission (SASAC) has mandated the appointment of independent directors to SOE boards, enhancing oversight and reducing political interference. By 2020, 95% of centrally managed SOEs had independent directors, reflecting progress in aligning governance with international standards.

Despite these strides, challenges persist. Balancing profitability with social responsibilities—such as employment stability in underdeveloped regions—remains complex. SOEs’ return on assets (ROA) averaged 3% between 2015 and 2020, lagging behind private firms’ 6%. Corruption and inefficiency have historically hindered performance, though anti-corruption campaigns since 2012 have investigated over 200,000 officials, improving transparency.

The reforms aim to address these issues while maintaining state control over strategic sectors. For instance, SOEs in energy and defense remain heavily state-owned, ensuring national security and economic stability.

Looking ahead, the government’s emphasis on technological innovation and advanced manufacturing underscores SOEs’ role in driving China’s economic transformation. By fostering market discipline and reducing reliance on subsidies, these reforms seek to strengthen SOEs’ global competitiveness while addressing long-term sustainability concerns.

As reforms evolve, their success will depend on balancing market-driven efficiency with the state’s strategic priorities, ensuring SOEs remain resilient in a dynamic global economy.