Structure and Principles of
SOE Governance
Peng Huagang, Deputy Secretary General, SASAC
Nov 18,2016
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Part 1: Reform Process
Part 2: Current Framework and Functions
Part 3: Reform Since 2015
Part 4: Principles
Part 1: Reform Process
1. Sectored model (prior to 1998)
SOEs were supervised and administered by various ministries
respectively. For instance, Shanghai Bao Steel Group
Corporation of China (BAOSTEEL) was supervised by the
former Ministry of Metallurgical Industry.
Part 1: Reform Process
2.Mutiple management (1998-2003)
One SOE was supervised by various authorities. Taking
BAOSTEEL for instance, its senior executives were appointed
by Central SOE Work Committee, while its assets were
supervised by Ministry of Finance, its investment and reform
issues were administered by former State Planning Commission
and State Economic and Trade Commission.
Part 1: Reform Process
3.Centralized (since 2003)
SASAC, established by the central government in 2003 as a
specially established authority to supervise and administer stateowned assets, performs the responsibility of investor of stateowned assets on behalf of corresponding level governments. At
the central level, SOEs in industrial and commercial sectors are
supervised and administered by SASAC.
“Company Law”
“Enterprise State-owned Assets Law”
Part 1: Reform Process
4.Further improved (since 2015)
Change from “enterprise management” to “capital management”
, establish or reorganize state-owned capital investment and
operating companies, reform authorized operation mechanism
for state-owned capital.
Three Changes
Change of
government
functions
Government do not administer SOEs directly, leaving them
in a better place to perform social and public management
functions, so as to create a level playing field for players of
various ownership.
Change of
authority
Sectored or multiple management models have been
changed to centralized model by SASAC, in which unified
optimal allocation of state-owned assets is more likely to be
achieved.
Change of
management
method
Former administrative orders have been replaced by a way
based on shareholders’ right, giving SOEs more autonomy to
compete in the market on a commercial basis
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Part 2: Current Framework and Functions
State Council
↓
Authorize
SASAC
↓
Central SOEs
Provincial Government
↓
Authorize
Provincial SASAC
↓
Provincial SOEs
Municipal Government
↓
Authorize
Municipal SASAC
↓
Municipal SOEs
Part 2: Current Framework and Functions
S
A
S
A
C
Responsibility
as investor
3 rights of shareholder
Supervision and
administration
of state-owned
assets
Unifying policies, guiding and supervising
state-owned assets security, making overall
plans
Part 2: Current Framework and Functions
Main functions of SASAC
1. Approve articles of association for enterprises invested by the
state;
2. Examine plan of development for enterprises invested by the
state;
3. Recruit and select senior executives for enterprises invested by
the state;
4. Manage issues of significance for enterprises invested by the
state according to authorization;
5. Set up a mechanism for incentives and restraints through
performance assessment;
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Part 2: Current Framework and Functions
Main functions of SASAC
(continued)
6. Regulate the transaction of state property right/equity
7.Improve corporate governance
8. Enhance financial auditing and the role of supervisory panels
9.Establish a state capital budget system
10.Strengthen institutions via laws and regulations on state- owned
assets
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Part 3:Reform since 2015
Enhance supervision on state-owned assets by capital management
• Promoting the function transformation of supervising authority of state-owned
assets with capital management at the core. Clarifying the responsibility of investor,
focus on a proper layout of state capital, standardized capital operation, higher capital
return, and to ensure capital security.
• Reforming the authorized operation mechanism for state-owned capital with capital
management at the core. Reorganizing and establishing state-owned capital
investment and operation enterprises, authorizing them to fulfill the responsibility of
shareholders.
• Encourage proper flows of and optimize the allocation of state-owned capital with
capital management at the core. SOEs as market-oriented entities could enjoy inflows
and outflows of state-owned capital, do certain things and refrain from doing other
things. Optimize the layout of state-owned capital, establish and improve “survival
the fittest” market exit mechanism.
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Part 4: Principles
1.Separate SOEs from the general government, which means that the general
government are no longer manage SOEs directly;
2.Separate ownership functions from social management function;
3.Separate ownership from business operations, strengthen state-owned
assets oversight with capital management at the core.
4.Establish one organization which performs investors’ responsibility to
achieve centralized supervision.
5.Follow the rule of the market, and make SOEs be independent market
players.
Thank you!
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