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The Chinese Government's New Approach to Ownership and Financial Control of Strategic State-Owned Enterprises, BOFIT Discussion Papers, No A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Mattlin, Mikael Working Paper The Chinese government's new approach to ownership and financial control of strategic state- owned enterprises BOFIT Discussion Papers, No. 10/2007 Provided in Cooperation with: Bank of Finland, Helsinki Suggested Citation: Mattlin, Mikael (2007) : The Chinese government's new approach to ownership and financial control of strategic state-owned enterprises, BOFIT Discussion Papers, No. 10/2007, ISBN 978-952-462-867-9, Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki, http://nbn-resolving.de/urn:NBN:fi:bof-201408071941 This Version is available at: http://hdl.handle.net/10419/212601 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu BOFIT Discussion Papers 10 • 2007 Mikael Mattlin The Chinese government's new approach to ownership and financial control of strategic state-owned enterprises Bank of Finland, BOFIT Institute for Economies in Transition BOFIT Personnel 2007 Economists Mr Pekka Sutela, head Mr Aaron Mehrotra, economist Russian economy and economic policy Chinese economy and economic policy Russia’s international economic relations Monetary policy in transition economies China in the world economy [email protected] [email protected] Mr Simon Ollus, economist Ms Tuuli Juurikkala, economist Russian economy and economic policy Russian economy and economic policy Russian industrial policy Private sector development [email protected] [email protected] Mr Jouko Rautava, economist Mr Juuso Kaaresvirta, economist Russian and Chinese economies and economic policies Chinese economy and economic policy Editor-in-Chief of BOFIT Russia Review and [email protected] BOFIT Online [email protected] Ms Tuuli Koivu, economist Chinese economy and economic policy Ms Heli Simola, economist Editor-in-Chief of BOFIT China Review Economic relations between Russia and Finland [email protected] Russia's impact on the Finnish economy [email protected] Mr Iikka Korhonen, research supervisor Exchange rate policies in transition economies Ms Laura Solanko, economist Monetary policy in transition economies Russian regional issues Editor-in-Chief of BOFIT Discussion Papers Public economics [email protected] [email protected] Ms Seija Lainela, economist Ms Merja Tekoniemi, economist Russian economy and economic policy Russian regional issues Editor-in-Chief of BOFIT Weekly [email protected] [email protected] On leave of absence Mr Vesa Korhonen, email: [email protected] Mr Jian-Guang Shen, email: [email protected] Information Services Mr Timo Harell, editor Ms Päivi Määttä, information specialist Press monitoring Information services [email protected] [email protected] Ms Liisa Mannila, department secretary Department coordinator Ms Tiina Saajasto, information specialist Publications traffic Information services [email protected] [email protected] Contact us Bank of Finland Phone: +358 10 831 2268 BOFIT – Institute for Economies in Transition Fax: +358 10 831 2294 PO Box 160 E-mail: [email protected] BOFIT Discussion Papers Editor-in-Chief Iikka Korhonen BOFIT Discussion Papers 10/2007 13.4.2007 Mikael Mattlin: The Chinese government's new approach to ownership and financial control of strategic state-owned enterprises ISBN 978-952-462-867-9 ISSN 1456-5889 (online) Helsinki 2007 BOFIT- Institute for Economies in Transition BOFIT Discussion Papers 10/ 2007 Bank of Finland Contents Abstract ...............................................................................................................................5 Tiivistelmä...........................................................................................................................6 1 Introduction ................................................................................................................7 2 Literature review.......................................................................................................11 3 Redefining the scope of state ownership in policy and in practice ...........................15 4 New approach to organising state ownership ............................................................25 5 Enhancing financial control over state-invested enterprises.....................................34 6 Conclusions ..............................................................................................................44 References .........................................................................................................................46 3 Mikael Mattlin The Chinese government's new approach to ownership and financial control of strategic state-owned enterprises All opinions expressed are those of the author and do not necessarily reflect the views of the Bank of Finland. 4 BOFIT- Institute for Economies in Transition BOFIT Discussion Papers 10/ 2007 Bank of Finland Mikael Mattlin The Chinese government's new approach to ownership and financial control of strategic state-owned enterprises1 Abstract This paper reviews recent regulatory and policy changes that affect the Chinese central government's ownership and authority over the capital allocations of strategic state-owned enterprises (SOE). The paper examines the reform of the central government's relationship with key SOEs as a consequence of the establishment of the State Assets Supervision and Administration Commission of the State Council (SASAC) in 2003, the coming introduc- tion of a centralised operating and budgeting system for SOEs, and the government's ongo- ing re-evaluation of its ownership policy. SASAC appears to have the potential to develop into a major actor in China's domestic capital allocation, with an active role in strategic fi- nancing and restructuring of key sectors of the Chinese economy. The data reviewed for this paper strongly suggests that the Chinese central government aims to retain significant ownership control over key SOEs and, by extension, over a major part of the domestic economy. The new operating and budgeting system is set to significantly enhance central government control over SOEs' capital allocation. Key words: State-owned enterprises, privatisation, corporate governance, China JEL classification: G32, G38, P26, P31 1 The research for this report was done during a visiting research period at BOFIT, June-October 2006. The author would like to thank Iikka Korhonen, Tuuli Koivu, Matti Nojonen and Juuso Kaaresvirta for helpful comments to earlier versions of this paper, and Jouko Rautava, Xing Yuqing and Max Jussila for general discussions on the topic. 5 Mikael Mattlin The Chinese government's new approach to ownership and financial control of strategic state-owned enterprises Mikael Mattlin The Chinese government's new approach to ownership and financial control of strategic state-owned enterprises Tiivistelmä Tutkimuksessa tarkastellaan Kiinan valtion omistajapolitiikkaa uusien säädösten ja viime- aikaisten politiikanmuutosten valossa. Keskushallinnon ja keskeisten valtionyhtiöiden suh- de on muuttumassa vuonna 2003 perustetun valtioneuvoston valtionomistuksen valvonta- ja hallintakomission (SASAC), tulevan keskitetyn valtionyhtiöiden toiminta- ja budjetoin- tijärjestelmän ja meneillään olevan omistajapolitiikan uudelleenarvioinnin seurauksena. Kiinan sisäisissä pääomien kohdentamispäätöksissä valtionomistuksen valvonta- ja hallin- takomissiosta näyttäisi kehittyvän merkittävä toimija, jolla on aktiivinen rooli keskeisten valtionyhtiöiden strategisessa rahoituksessa ja avaintoimialojen uudelleenjärjestelyissä. Tätä keskustelualoitetta varten koottu aineisto viittaa vahvasti siihen, että Kiinan valtio pyrkii omistajapolitiikallaan säilyttämään vahvan omistuksen keskeisissä valtionyhtiöissä ja sitä kautta myös vahvan roolin valtiontaloudessa. Uuden toiminta- ja budjetointijärjes- telmän myötä keskushallinnon määräysvalta strategisten valtionyhtiöiden pääomien koh- dentamisiin näyttäisi kasvavan merkittävästi. Asiasanat: valtionyhtiöt, yksityistäminen, yritysten hallintakäytäntö, Kiina JEL: G32, G38, P26, P31 6 BOFIT- Institute for Economies in Transition BOFIT Discussion Papers 10/ 2007 Bank of Finland 1 Introduction Despite three decades of economic reforms in the People's Republic of China (PRC), re- structuring of large state-owned enterprise groups has proceeded at a slow pace in recent years. While a variety of different measures and reform models have been tried since the 1980s,
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