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Reform of state-owned enterprises

State-owned enterprises (SOEs) are the backbone of our national economy. They provide the material and political basis for developing socialism with Chinese characteristics. They are also important pillars underpinning the efforts of the CPC as the ruling party to govern the country and promote national development. Reform of SOEs is critical to both economic and social reform. It is the most important among all reform initiatives, as it bears on all aspects of national development. It is a difficult, complex and immense task that requires sustained commitment. 

There have been several rounds of reform involving SOEs since the rollout of the reform and opening-up program, including the introduction of a contract system, a program to replace turning over business profits with income tax, implementation of managerial accountability, and promotion of modern corporate governance. At its third plenary session in 1993, the 14th CPC Central Committee called for modernizing corporate management, a move that paved the way for accelerating SOE reform. At its third plenary session in 2013, the 18th CPC Central Committee called for pursuing SOE reform at a deeper level. The year 2016 was a watershed year when the implementation of new reform policies began. To support a new round of SOE reform, the 2016 report on the work of the government outlined a series of pilot measures, such as diversification of forms of ownership – including introduction of mixed ownership – establishment of corporate boards of directors, open selection of executives and managers, and introduction of employee equity stakes. These measures were accompanied by initiatives to reform and reorganize national capital investment and management corporations. Together, they opened a chapter in SOE reform.  

Unlike previous reforms, the current reform measures focus on innovation, and aim to sharpen the competitive edge of SOEs by tapping into their innovative potential, so as to build world-class enterprises and brands in response to the drive for economic structural upgrading. To this end, business integration and reorganization is essential. Some SOEs that use too much energy and produce too much pollution are being phased out. Another important reform measure is to expand market access in areas where SOEs used to enjoy monopolies, so as to allow private capital to have more opportunities to compete.  

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