The Telegraph
Saturday , November 10 , 2012
Since 1st March, 1999
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Reforms should mean growth: China firms

Beijing, Nov. 9 (Reuters): China’s big state-owned enterprises argued for continued expansion today, echoing outgoing President Hu Jintao’s comments urging more investment in major government firms and curtailing hopes of reform in the bloated sector.

Party delegates spent day two of the 18th Communist Party Congress holding public debates on Hu’s speech at which they read out bits that they particularly liked. Reuters reporters heard no one disagreeing with what Hu said in a nearly two-hour-long speech.

At the opening of the congress yesterday, Hu stressed the importance of continued one-party rule and how it was threatened by corruption, a reference to the downfall of one-time high-flying politician Bo Xilai.

He also suggested a further strengthening of the state in strategic sectors, with the possibility of more market-oriented competition in other sectors.

“The direction of the SOE (state-owned enterprise) reform should be: SOEs must be more market-oriented and they must keep strengthening their vitality and influence,” Wang Yong, the head of a commission on supervising and administering state-owned assets, told reporters.

“Scholars may have different views, but that’s the development need of the enterprises and the state.”

Hu had said yesterday that Beijing must “unwaveringly consolidate and develop the public sector of the economy”. “(We should) invest more state capital in major industries in key fields that comprise the lifeline of the economy and are vital to national security.”

But outgoing Premier Wen Jiabao vowed in a speech earlier this year that Beijing would push ahead with monopoly-busting. “We must move ahead with reform of the railway, power and other industries, complete and implement policies and measures aimed at promoting the development of the non-state economy, break monopolies and lower industry thresholds for new entrants,” he had said.

State-owned enterprises and affiliated businesses account for more than half of output and employment in China, the world’s second-biggest economy.

They include power grid-operator State Grid, the world’s seventh-biggest company.

Oil giants Sinopec Group and China National Petroleum Corp, parent of PetroChina, rank fifth and sixth, respectively. Of the 70 mainland companies on the 2012 Fortune Global 500 list, 65 are state-owned.

Chinese reformers and western governments say their sheer size and market dominance creates a drag on the economy through vast opportunity for corruption and waste, leading to higher costs for consumers.

Calls for reform built up as factions manoeuvred ahead of the once-in-decade leadership transition at the congress. When Xi Jinping, Hu’s anointed successor, is in place he will be under immediate pressure to break the grip of inefficient SOEs and reinvigorate China's three-decade-long economic miracle.

But he will have to deal with the divisions within the party on policy.