Nov 13, 2013 05:48 PM

Plenum Insight: Conclave 'Didn't Change Status of SOEs'

(Beijing) – The ruling Communist Party is being more conservative about reforming state-owned enterprises (SOEs) than some advocates of a market-oriented approach would prefer, one expert says.

The third plenum of the party's 18th Central Committee ended on November 12, and financial experts quickly set out to examine its contents.

Institutions including investment bank China International Capital Corp. and brokerage firms Citic Securities and Minsheng Securities held teleconferences that night. Discussions centered on how the decisions would affect the financial market.

The plenum did nothing to change the status of SOEs in the economy, which will disappoint some, Guan Qingyou, assistant dean of the Minsheng Securities Research Institute, said in the securities firm's teleconference.

Advocates of a more market-oriented economy have been calling on the government to break SOE monopolies in most industries and level the playing field for private investors. However, most people supervising state assets and some scholars argue that SOE reform means improved management approaches and incentive mechanisms that can make the companies stronger and more efficient.

The communiqué states that the government will consolidate and develop state and collective ownership in the economy, and help it maintain a dominant role. The state-owned aspect of the economy will continue playing a leading role and its influence will be reinforced.

As for the part of the economy not held by the state or collectively owned – which would include family businesses, private companies and foreign-funded companies – the government will "encourage, support and guide" its development, and "inspire its vitality and creativity."

This is hardly any different than what the party has always said, Guan said.

Also, the communiqué did not mention how private investors can, in practice, gain greater access to fields traditionally occupied by state-controlled companies, he said. The idea has been talked about for years, but doesn't get much past that.

In light of the communiqué, Guan said changes to SOEs would likely involve operational details rather than institutional change.

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