Modern enterprises

Bringing in non-State investors is deemed as a catalyst for better corporate governance.

Once publicly owned, China's SOEs have been engaged in corporate reform since the 1990s to turn themselves into limited liability companies or companies limited by shares.

This allows the introduction of shareholders, paving the way for the much-advocated transformation into modern enterprises.

So far, such reform has been basically wrapped up, according to Peng.

Authorities are pushing SOEs to overhaul their payroll and human resource management, set up boards of directors, hire professional managers and provide equity incentives.

To encourage more efficient growth, the SASAC will start to assess performances of SOEs in terms of overall labor productivity this year, along with other market-oriented measurements.

Sinopec Zhenhai Refining & Chemical Co is the epitome of the drastic corporate changes taking place in SOEs. An unknown local refiner in the 1970s, it has become a top-notch industry player globally.

The Zhejiang province-based company has streamlined work procedures by 40 percent in recent years and adopted a highly market-oriented incentive system. With better corporate governance and technology, its per capita output surged to 15 million yuan in 2020 from 2 million yuan in 2000.

"Our company's production capacity has tripled since 2000, while our headcount has been reduced and efficiency has been boosted," said Mo Dingge, CEO of Sinopec Zhenhai.

Less is more

The transition into modern enterprises is imperative as China continues to level the playing field, creating a fairer environment for competition.

Key industries like energy, railways, automobiles, telecommunications and public utilities have been gradually opened up for private and foreign investment.

Li expects "significant progress" to be made in further expanding non-State firm access to State-dominated areas during the three-year period.

Meanwhile, SOEs are downsizing their presence in some fields. They have been asked to exit areas irrelevant to their core business or where their investments lack efficiency and competitiveness.

Central SOEs have divested themselves of such businesses, retrieving 3.45 billion yuan since the end of 2019, SASAC data showed.

In sectors with overlapping investment or homogeneous competition, restructuring between SOEs is encouraged. So far, 41 central SOEs have been regrouped, reducing total central SOEs to 97.

The capital shake-up is directing State-owned assets to concentrate on key industries related to national security, economic lifelines and public welfare, or those with strategic importance.

Emerging technology is one of them. Weng Jieming, deputy head of SASAC, said more investment from central SOEs will be guided toward 5G, industrial internet, artificial intelligence, data centers and other "new infrastructure".

China Baowu Steel Group Co Ltd, the world's largest steel conglomerate, was the outcome of reorganizations between several State-owned steel giants. As a result of better allocation of resources, efficiency was improved and innovation fostered.

"We will spare no effort to build ourselves into a high-tech company," said Chen Derong, chairman of Baowu Steel. "Steel is a traditional product, but we will be a high-tech company in terms of technology, means of production and services."

Cutting regulatory fetters is expected to help SOEs enhance their innovative prowess. Regulators are giving SOE executives more autonomy in making corporate decisions, including drafting annual investment schemes, arranging mixed-ownership reform of subsidiaries and issuing short-term bonds.

The new regulation approach will effectively prevent excessive State intervention in corporate operations, Liu noted.

"Regulators are receding from the front stage to the backstage," he said. "SOEs can decide what to do in accordance with market rules, which will make a big difference."