More clarity on status of Chinese private firms, SOEs needed

Source:Global Times Published: 2018/11/6 22:08:41

More clarity on status of private firms, SOEs needed

Illustration: Xia Qing/GT

Expressions like "competitive neutrality" and "ownership-neutral" have been frequently mentioned by heads and spokesmen of some government agencies in recent days. The remarks were made in response to overseas skepticism toward China's State-owned enterprises (SOEs). The "neutrality" concept and "equal treatment" for enterprises with different forms of ownership have long been emphasized in government documents. Yet, the survival and development of the private economy has always been considered a challenge. This is mainly because some important theoretical and policy questions haven't been answered and, in practice, there is still a long way to go to achieve "competitive neutrality."

Properly addressing these theoretical and policy issues will stabilize public expectations and lead to the prosperous development of the private economy. Moreover, Chinese companies will face less resistance when expanding overseas and they will gain more confidence.

First, is development of the private economy only necessary in the primary stage of socialism?

In the past, the relatively low level of productive forces in the primary stage of socialism was said to be the main reason for the existence of the private economy.

This inevitably gives the impression that the existence of the private economy is a temporary measure, and that the private economy can be eliminated once socialism enters the intermediate or advanced stage with more developed productive forces.

In the new era of reform and opening-up, it is now necessary to keep pace with the times by further clarifying the equal status of various forms of ownership. It should be made clear that the existence of diverse forms of ownership is not just an expedient measure for a certain stage of development; it is the basis for the socialist market economy.

Second, what is the economic and political foundation for socialism and the governance of the Communist Party of China (CPC)?

It is true that the State-owned economy is an important economic foundation for socialism, and is also an important economic and political foundation for the CPC. But that doesn't mean the private economy is less important for the CPC. If we limit the private economy and expand the State-owned economy, it will harm both the CPC and the country's economic foundations. These foundations must be conducive to the development of productive forces, to the improvement of people's living standards, and to enhancing the overall strength of socialist countries.

Third, how can we scientifically summarize diverse forms of ownership and multiple economic sectors?

From the perspective of globalization, SOEs in developed countries are usually enterprises wholly owned and directly operated by the state, and all the other companies in the market, regardless of their ownership, are referred to as the private sector or private firms, which are privately operated and have no affiliation with the government. But in China, enterprises with diversified forms of ownership and different shareholders are still called SOEs, and they are still managed according to the SOE regulations and system. This is also why our companies are misunderstood internationally and are considered to be non-market-oriented enterprises that are affiliated with the government.

Therefore, it would be advisable for the title of State-run enterprise to apply only to those firms that are wholly owned by the State and managed based on specific regulations. All the mixed-ownership enterprises with multiple types of shareholders should be referred to as mixed-ownership enterprises, so as to cut off the administrative connection with the government. They should be managed and supervised by the State-owned Assets Supervision and Administration Commission based on market principles.

Fourth, is there a restricted zone for the discussion of economic issues?

At present, many industries and enterprises are easily affected by the external environment and macroeconomic policies. Changes in macroeconomic policies often determine the fate of a large number of enterprises. Therefore, entrepreneurs at the forefront of the market economy pay a lot of attention to the macro environment and relevant policies. Experts and scholars from all walks of life also have a lot of insights because of their wide contacts. In this sense, on economic issues, it is beneficial, or at least does more good than harm, to listen to various opinions and to allow discussions and debate about different topics among the public.

On economic issues, it shows a lack of confidence to set limits and to prohibit discussion and criticism. Such restrictions will only harm ourselves.

In short, the actual realization of competitive neutrality will provide a solid foundation for the healthy development of China's socialist market economy and for the competitive position of Chinese enterprises in the globalized market. Only in this way can reform and opening-up complement each other, so that China can deal with external pressure and challenges more efficiently.

The article was compiled based on a speech made by Hua Sheng, a renowned Chinese economist, at a forum on October 27.
Newspaper headline: More clarity on status of private firms, SOEs needed


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