Partial privatisation and the role of state owned holding companies in China

摘要

China has never agreed to full privatisation of its state-owned enterprises (SOEs). This essentially means a dual role for the government—as a shareholder of privatised SOEs and a regulatory authority of the corporate sector. This begs the question—how does the government avoid being caught in the awkward state-first condition where political-economic interest overrides the commercial interest as its exercises both the shareholder and regulatory roles? This paper argues that a positive way forward is to establish state-owned holding companies (SOHs). As shareholders representative of the government, the SOHs serve to monitor the performance of partially privatised firms and see that the state receives its fair share of return. In China, the State-Owned Assets Supervision and Administration Commission (SASAC) assumes the role of the SOH. However, the relationship between the central government and SASAC is ambiguous with evidences suggesting SASAC’s commitment to political-economic goals. To play the role more effectively, this paper argues that SASAC must function independently of the government. SASAC must demarcate the government’s role as a shareholder and a regulator with SASAC assuming the role of a shareholder representative of the government.