Chinese provinces test the waters of SOE reform
After a pledge to grant local governments more power over the reform of state-owned enterprises (SOE) in the latest government work report, at least 25 provinces have issued reform plans, with most offering employee stock ownership on a trial basis, chinanews.com reported on Tuesday.
In the work report, the central government urged an accelerated pace for SOE reform, which covers equity diversification, board mandates, executive recruitment, management systems, mixed ownership and employee stock ownership.
So far, 25 provinces, autonomous regions and cities have drafted detailed plans. Included on that list are Shandong, Jiangsu, Zhejiang, Yunnan, Hunan, Sichuan, Jiangxi, Shanxi, Qinghai, Hubei, Henan, Liaoning, Guangzhou, Heilongjiang, Hebei, Jilin, Gansu, Fujian, Ningxia Hui Autonomous Region, Guangxi Zhuang Autonomous Region, Shanghai, Beijing, Tianjin, Chongqing and some others.
Most of the new plans include a pilot program for employee stock ownership. For instance, Gansu, one of the western provinces, will select qualified provincial SOEs for the first round of the program. Some provinces have also made timetables for the reforms. Hebei, a northern province, planned to complete the pilot program outline by the end of 2015, and put it into practice in 2016.
Li Shuguang, a professor at China University of Political Science and Law, said that employee stock ownership is a breakthrough for ownership reform. However, since it involves the interests of employees and intellectual property owners, a trial operation is the prudent route.
Reform of remuneration systems is also a big focus. A guideline issued by the Communist Party of China Central Committee and the State Council last September called for a differentiated remuneration system. According to the guideline, remuneration of executives should be linked with the executives’ positions, as well as with their individual performances and the revenue of their enterprises.
Zhou Fangsheng, Deputy Director of the China Enterprise Reform and Development Society, said that a differentiated remuneration system will break the current one-size-fits-all approach. Hebei province, for instance, will outlaw all forms of bonuses or premiums in its plan. A better incentive system will take shape after market-oriented remuneration goes into effect, Zhou added.
So far, 25 provinces, autonomous regions and cities have drafted detailed plans. Included on that list are Shandong, Jiangsu, Zhejiang, Yunnan, Hunan, Sichuan, Jiangxi, Shanxi, Qinghai, Hubei, Henan, Liaoning, Guangzhou, Heilongjiang, Hebei, Jilin, Gansu, Fujian, Ningxia Hui Autonomous Region, Guangxi Zhuang Autonomous Region, Shanghai, Beijing, Tianjin, Chongqing and some others.
Most of the new plans include a pilot program for employee stock ownership. For instance, Gansu, one of the western provinces, will select qualified provincial SOEs for the first round of the program. Some provinces have also made timetables for the reforms. Hebei, a northern province, planned to complete the pilot program outline by the end of 2015, and put it into practice in 2016.
Li Shuguang, a professor at China University of Political Science and Law, said that employee stock ownership is a breakthrough for ownership reform. However, since it involves the interests of employees and intellectual property owners, a trial operation is the prudent route.
Reform of remuneration systems is also a big focus. A guideline issued by the Communist Party of China Central Committee and the State Council last September called for a differentiated remuneration system. According to the guideline, remuneration of executives should be linked with the executives’ positions, as well as with their individual performances and the revenue of their enterprises.
Zhou Fangsheng, Deputy Director of the China Enterprise Reform and Development Society, said that a differentiated remuneration system will break the current one-size-fits-all approach. Hebei province, for instance, will outlaw all forms of bonuses or premiums in its plan. A better incentive system will take shape after market-oriented remuneration goes into effect, Zhou added.
