How will the big SOEs develop themselves in the competitive fields?

The driving force and direction of the reform would be the diversification of ownership, which could be realized through two channels: partnerships with outside investors and listings. Most outside strategic investors ask for a controlling stake. As for the large SOEs, which play a special role in our economic system, the pragmatic solution would be listing on stock markets, including domestic or overseas share sales, or simultaneously. In my view, it would be very helpful for the big SOEs to change their business operation methods.

For wholly state-owned enterprises, the SASAC is piloting its board of directors system in the management reform. As a matter of fact, most SOEs overseen by SASAC are not yet operating under a modern corporate governance system, since their boards of directors are mainly made up of personnel chosen within the enterprises. Instead, they should implement a system with clear accountability, to ensure a balance of power and protection of outside investors.

The external board directors, selected by the SASAC and directly responsible to the SASAC, will play a bigger role in supervising the use of state assets and the collective decisions made by the leadership of the enterprises.

The aim of SOE reform should be the actual combination of the state-owned economy and market economy.

How do you define the success of SOE reform?

SOEs were born with the centrally planned economy, suited to the specific environment in China's old system. As the economy moved from a planned to a market-oriented one, problems emerged showing that the SOEs were not in tune with the emerging market economy. This was obvious in all areas, ranging from the enterprises themselves to employees and rapidly changing social environment.

In response we have to push reform forward to make the SOEs and state-owned economy eventually become adaptable to a market-oriented economy, meaning the eventual realization of a seamless combination of market economy and state-owned economy.

If we look at issues plaguing enterprises, they can be divided into two. First, whether the enterprises that we withdraw support from can survive in the market or not. If the troubles facing them can be solved after the reform, it becomes a success.

The second is whether the shift in role of state-owned businesses after reform could make them market-oriented entities and whether their management methods can catch up with the market changes or not. As a matter of fact, the diversification of ownership will help the establishment of a streamlined corporate governance system and getting rid of the heavy financial burden left by history. What is more, the ownership can be freed up along with the marketization of both the employees and business operators, which indicates the upgrading of both the labor force and business owners.

Market rules should not only apply to the way of doing business, but also to the withdrawal of enterprises by sale, auction, reorganization and closure.

The reform should consist of the combination of state-owned economy and market economy, making it an organic component of the latter, rather than an inflexible one. To realize this, we should seek more help from government departments in fulfilling their social responsibility and other facilitating reforms.