Editor's note: Liu Chunsheng is an associate professor at the Beijing-based Central University of Finance and Economics and deputy dean of Blue Source Capital Research Institute. The article reflects the author's opinions, and not necessarily the views of CGTN.

The reform of state-owned enterprises (SOEs) has been the epitome of China's process of economic reform over the past four decades.

Owing to continuous reform, China’s SOEs have achieved marvelous development, and the long-term development of SOEs has consolidated the premise basis for further expansion of reform and opening-up. 

According to the statistics, the 2018 sales revenue and profits of 96 central SOEs respectively increased 10.1 percent and 16.7 percent and rose to 29.1 trillion yuan and 1.7 trillion yuan. 

On the other hand, the debt-to-asset ratio of China's central SOEs fell to 65.7 percent, 0.6 percentage points down from 2017. In general, the reform of SOEs has been carried out in some major areas, namely, corporate system and mixed-ownership reform, structural adjustment and state-owned assets management system reform, and has achieved a series of results.

Major changes have taken place in the operating mechanism of SOEs. Most of them have undergone corporate and shareholding system reforms and a modern enterprise system has been initially established. 

The corporate governance structure has been gradually standardized. Most SOEs have become independent market entities, and traditional SOEs affiliated with the planned economic system have been transformed into a "new state-owned enterprise" under the market economy system. 

The high-quality standard system is being formed. SOEs’ de-capacity, de-leverage and debt ratio cut have been greatly relieved. China also aims to create world-competitive multinational companies among SOEs. Moreover, the distribution mechanism has been reformed to encourage autonomy of SOEs and the working enthusiasm of their employees. 

The strategic layout of the SOEs has undergone fundamental changes. The functions of SOEs are mainly concentrated in the provision of public service industries, to serve the national strategic objectives, to invest in important industries and key areas that are related to national security, to protect the ecology and environment, and to support scientific and technological innovation. 

As China's economic system reform enters the deep water area, the reform of SOEs will also be accelerated in the next few years with the expected focus on the following moves. It is believed that the mixed ownership reform will be highlighted. China will actively explore the mixed ownership reform of the SOEs, accelerate the reform of their subordinate enterprises, and further deepen the pilot mixed ownership reform in key areas.

Another move will focus on the market-oriented operating mechanism. The establishment of a professional management system and the medium and long-term incentives such as employee stock ownership, shareholding plans of listed companies, and equity dividends of technology-based enterprises should be strengthened. 

Moreover, the authorization management system will embrace further reform. China will intensify reforms in terms of organizational structure, operation model, and operational mechanism, and promote the effectiveness of state-owned capital investment.

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