SOE reform over China’s opening-up

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Chinese President Xi Jinping re-assured the markets about China's commitment to opening up during a speech this week at the Boao Forum for Asia, but China's vast state economy could be a major problem for the effort.

The question matters to those competing for global market share with Chinese state owned companies. Former WTO Director General Pascal Lamy indicated that SOEs as a large trunk accounts for 40 percent industry assets needs to shrink.

However, the chief of China's state asset watchdog doesn't agree. Xiao Yaqing, the director of SASAC of the State Council said SOEs are lower than other types of companies in terms of the weight in GDP.

VCG Photo

Meanwhile, the former IMF deputy managing director, Zhu Min, said China’s SOE have already shrunk in size but beefed up in strength.

“Regardless as the US and China trade issue, we should do what we need or have to do including SOE reform. Actually, the reform is accelerating. China now has 97 centrally administered SOEs, down from 196. Their assets, however, have increased to 50 trillion yuan from 10 trillion yuan. That shows that those companies have become stronger,” Zhu added.

In addition to pressure from China-US trade tensions. Director Xiao admitted that it will be more difficult this year for Chinese state-owned companies to test overseas markets, as the globalization momentum slows while China is counting on better SOE profits to push bolder reforms.