PDF《The Role of State-Owned》

s SOEs benefit from access to preferential financing C are subject to debate. Furthermore, many SOEs compete against each other very aggressively, and they should not be seen simply as government-con- trolled monopolies. China'

s central government has reaffirmed its determination to accord national treatment for all foreign-invested companies. At the fourth meeting of the U.S.-China Strategic and Economic Dialogue ExecutiveSummary

3 held in May 2012, China committed to developing a market environment of fair competition and treat- ing all enterprises without discrimination. In line with the longstanding strategy of implementing re- forms in a gradual manner, China issued a set of di- rectives in mid-2012 to encourage the development and growth of China'

s non-state enterprises. China also introduced further measures in late-2012 to al- low more market competition in vital industries, including financial services, healthcare and tele- communications. China now needs to demonstrate that its actions validate its statements of intent. Given the long history of SOEs and the enor- mous social responsibilities imposed on them, China'

s gradual approach to SOE reform is under- standable. Today, deficiencies in China'

s market infrastructure continue to prevent the government from fully allowing free market forces to run the economy. The government will continue, therefore, to have an important role to play in resolving these transition problems in China'

s development. Our study proposes that the Chinese governments at all levels should focus on providing public goods;

de- veloping and maintaining an efficient market infra- structure;

and ensuring fair competition, including national treatment for all enterprises, regardless of the nature and background of ownership. China'

s main SOEs will continue to play a ma- jor role in both the domestic and global markets, particularly in strategic industries and sectors. But China'

s SOE and market reform should continue, as the government has pledged. Our study suggests that the government'

s shareholding in SOEs could fall below 50% without compromising the need for the state to remain a major and controlling share- holder. In the longer term, state ownership of SOEs could be confined to non-contestable sectors only. Meanwhile, reform of the governance of the SOEs should continue. Recent initiatives C such as the re- quirement for SOEs to increase their dividend pay- outs, the introduction of proper recruitment and appointment systems for top-level executives and external directors, and efforts to address intercon- nected party transactions C are steps in the right direction. Above all, greater transparency is needed in the decision-making processes of the SOEs, along with assurances that they are operating indepen- dently and at arm'

s length from the government.

4 Introduction In recent years, issues surrounding SOEs have be- come growing sources of friction between China and some of its trading partners, including the U.S. The disputes reflect the rising clout of some of Chi- na'

s SOEs at home and abroad, and have come to the fore due to some high-profile cases involving acqui- sitions and mergers. The main complaint from the U.S. business community is the perceived unfair advantages given to China'

s SOEs by the govern- ment, with the playing field tilted against foreign companies in the Chinese market. The global ad- vance of China'

s large SOEs, with support from the government, is also seen to be putting pressure on foreign competitors or even placing them at a disad- vantage in the global market. Concerns about the rising importance of China'