Shanghai released detailed reform guidelines Tuesday for its State-owned assets (SOAs) and State-owned enterprises (SOEs), in an effort to boost market vitality and increase management efficiency.

The guidelines said that Shanghai will invest 80 percent of its SOAs in key industries including advanced manufacturing, infrastructure and the modern service industry. The city will nurture two to three State-owned capital management companies, five to eight multinational corporations and eight to 10 domestic firms to lead the local market.

The city, which has nearly 10 trillion yuan ($1.65 trillion) worth of SOAs, will also carry out reform of the SOE shareholding system, and speed up the listing process for some companies' overall or core businesses, according to the guidelines. 

"The reform will unleash the great potential of the city's SOEs, which will be a significant step for Shanghai to break the bottleneck of development," Shanghai Party chief Han Zheng was quoted as saying Tuesday by Shanghai Daily.

The government should step back from the day-to-day operation of SOEs, and put its efforts into regulating and supervising the market, the guidelines said, noting that the SOAs' supervision agencies should push for deeper reforms.

Also, companies will need to hand at least 30 percent of the profits made from SOAs to the government by 2020, and the money will then be spent on infrastructure construction, social welfare and industrial restructuring, the guidelines said.

Currently SOEs only need to hand in 10 percent of the earnings made from SOAs.

"In many cases, SOEs benefit from government support and stand at an advantageous position in the market. They usually do not need to expand their operation since that might hurt the competitive environment," Tian Yun, a research fellow with the China Society of Macroeconomics at the National Development and Reform Commission, told the Global Times Tuesday.

"Therefore, the government should claim more of the profits and use the money to bring benefits to the public," Tian said.

Under the guidelines, Shanghai's SOEs will be placed under three categories - competitive, functional and public utility SOEs - with distinct goals.

Competitive SOEs will aim at maximizing their financial earnings; functional ones will fulfill government orders or conduct major projects; and public utility SOEs will enable the stable functioning of the city and create social benefits.

Liang Ping, director of the SOA supervision and administration center at the Guangdong Academy of Social Sciences, told the Global Times Tuesday that although Shanghai is a pioneer in pushing SOA and SOE reforms in China, the guidelines still lack innovation and are not detailed enough.

"Most plans suggested in Shanghai's guidelines, such as deepening the shareholding system reform and investing the SOAs in emerging industries, were mentioned before but not implemented well," Liang said. "And the guidelines did not give details in many areas, such as what 'transparency of SOA investment' should involve."

Senior executives at Shanghai's SOEs will receive performance-related compensation packages, the guidelines said. And executives at functional and public utility SOEs will receive rewards after they have finished major projects.

Shenzhen in South China's Guangdong Province and Southwest China's Chongqing Municipality are expected to publicize similar plans next year, the China Securities Journal reported Thursday.

"Shanghai is the pioneer because it has the talent, the resources and is very globalized," Tian said. "Other less developed cities may find it difficult to carry out such reforms since they do not have the resources that Shanghai has."

New rules for executives

Under Shanghai's new guidelines, competitive SOEs should separate the position of general manager from that of the chairman of the board, who is also the company's Party secretary. For functional and public utility SOEs, the same person can be the chairman and general manager, but cannot be the firm's Party secretary.

The guidelines also encourage SOEs to explore overseas acquisitions and merger opportunities, and to learn from the compensation systems used in other countries and regions. The government will also simplify the procedures for SOEs in conducting foreign investment.

SOE senior executives will be hired based on contracts for limited time periods, in order to ensure the stability and flexibility of the firms' management, the guidelines noted.

Supervision methods for SOAs should also be enhanced by reducing administrative barriers and standardizing the supervision practices.

Government employees' performance will also be evaluated based on their effectiveness in introducing the reforms, the guidelines said.