China
20:23, 29-Sep-2017
The Big Picture: China SOEs up their game to keep-up
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“I never expected to be laid-off one day. There were so many people who lost their jobs, just like me. I would've become a manager if the company was still running well.”
Those words came from Jiang Fan, a worker dismissed from his role as a result of China’s structural reform, which spurred state-owned enterprises to cut excess capacity – including staff members – in a drive to be more competitive and market-driven.
“They didn't give a penny when I left. Those who stayed had no income, either,” Jiang Fan adds.
This has inevitably also affected businesses which were previously patronized by these laid-off workers. In this instance, the bath house where Jiang Fan used to frequent.
What is seen here is a case of ‘short-term pain for longer-term gain’.
However, is reducing capacity, including cutting back employees, the only way forward to boost efficiency?
CGTN correspondent Han Bin takes a look at companies based in Shenyang in north China, where SOEs there are hit the hardest as they seek to make efficient use of resources, and move up the value chain.
Placing innovation at the core
Guan Xiyou, Chairman of Shenyang Machine Tool (Group) Co. Ltd, believes a company’s success depends on its creative strength, which includes its core technology, to compete with the world.
“Without innovative capability, even if you cut all staff, the company won’t survive. We have gone through a painful process to realize institutional innovation,” says Guan.
And painful it was. He recalls having to face 8,000 workers waiting for wages to support their families.
But the company has come a long way. Over 10 years of research, Shenyang Machine Tool has launched the world’s first integrated smart machine toolmaker. The i5 series produces products ranging from phone casing to various high-precision parts, such as car components.
This is a clear example of how a company transforms from traditionally being a manufacturer to becoming an industrial service provider.
“From the government side, it should further loosen its control on the SOEs and introduce creative management that suits growth. Inclusiveness is needed to carry out some institutional reforms,” Guan adds.
Rejuvenation of SOEs possible
Another company that has weathered the economy slowdown and come out stronger is Shenyang Siasun Robot & Automation Co. Ltd.
The company now devotes 80 percent of its staff to research and development.
Its products are exported to nearly 30 countries globally, but it wants to intensify efforts to further expand its reach, saying, ‘China’s robot makers are making steady progress’.
“The revitalization of northern China’s SOEs, is not simply transforming stated-owned into other forms of ownership, or acquiring new talent. The key lies in creating an ecological platform of new industries in the future,” says President Qu Daokui.
With new industries, come new technologies and products.
Reforms take time
While SOEs face challenges in adapting to the ever-changing world, it is nonetheless possible, as these two companies have shown.
Presently, China has more than 150,000 SOEs, employing millions.
Rome wasn’t built in a day, and so one should expect a structural reform of SOEs to also take time. It is commendable that China has taken the first step forward to implement this. The key now lies in executing and sustaining the process until the desired result is reached.
Alas, this is perhaps also a good opportunity for companies to weed out those not in-line with their respective end goals. In Jiang Fan, the laid-off worker’s case, he has begun to accept that his role to play in the future has diminished.
As they say, if you can’t beat them, join them. And for those who are unable to join, there could only be one way out. “I only hope to earn more money, and don’t want to think about the city’s future,” Jiang Fan says.
Guan Xiyou, Chairman of Shenyang Machine Tool (Group) Co. Ltd, believes a company’s success depends on its creative strength, which includes its core technology, to compete with the world.