Since the 16th National Congress of Communist Party of China, with the promotion of the management system reform of state-owned assets, the reform of state-owned enterprises enters a new stage promoted by investors. During these 4 years, SASAC, as the special organization representing the government and fulfilling the functions of investor to state-owned assets, carried out pioneering work closely around establishing and perfecting supervision and administrative system of state-owned assets, enhancing supervision to state-owned assets, accelerating the reform of state-owned enterprises and promoting layout and structural adjustment of state-owned economy. The organization establishing, regulations perfecting and responsibility fulfilling are considered as the cut-in point in order to establish and perfect supervision and administrative system of state-owned assets. The financial supervision and risk control are considered as the hand grip in order to intensify the supervision to investors. The open recruitment of senior operation governor in central enterprises is considered as the breakthrough in order to combine the principle of “CCP administrating cadres” with market-oriented selection and employment and explore and establish new talent selection and employment system suitable for modern enterprise system. The shareholding system reform of state-owned large-scale enterprises is considered as the focus in order to establish modern enterprise system and perfect corporate administrative structure. The authorization of major business and promotion of combined reorganization are considered as the main line in order to advance layout and structural adjustment of state-owned enterprises. Establishing modern property right system is considered as the core in order to standardize the system reform of state-owned enterprises and transfer of state-owned property right. After efforts, the frame of new state-owned assets supervision and administrative system has almost been established. The supervision to state-owned assets has been enhanced and the responsibility of value preserving has been implemented.

The reform of system inspires the vigor of enterprises. 

In recent years, the reform of state-owned enterprises obtained obvious achievements. The total volume of state-owned economy increased further. The economic effects, operation quality and competitiveness are increased obviously. The control, influence and impetus are also enhanced further.

In 2006, the total number of state-owned enterprises in the nationwide was 119,000, which increased by 31,000 compared with that of 2003 with average annual decreasing rate of 8%. However, the realized accumulating sales income was 16,200 billion RMB, which increased by 50.9% compared with that 2003 with average annual increasing rate of 14.7%. The realized profits was 1,200 billion RMB, which increase by 147.3% compared with that 2003 with average annual increasing rate of 35.2%. The turned in tax was 1,400 billion RMB, which increased by 72% compared with that of 2003 with average annual increasing rate of 19.8%. The total volume of enterprise assets was 29,000 billion RMB, which increased by 45.7% compared with that of 2003 with average annual increasing rate of 13.4%. The average volume of assets per enterprise was 240 million RMB, which increased by 84.6% compared with that of 2003 with average annual increasing rate of 22.7%.

In 2006, the realized sales income of central enterprises was 8,300 billion RMB, which increased by 85.3% compared with that of 2003 with average annual increasing rate of 22.8%. The realized profits was 768.15 billion RMB, which increased by 155.5% compared with that of 2003 with average annual increasing rate of 36.7%. The turned in tax was 682.25 billion RMB, which increased by 91.5% compared with that of 2003 with average annual increasing rate of 24.2%. The yield of net assets was 10.1%, which increased by 5.1 percentage points compared with that of 2003. The total assets returning rate was 7.9%, which increased by 2.9 percentage points compared with that of 2003. By the end of 2006, the total volume of central enterprise assets was 12,200 billion RMB, which increased by 46.5% compared with that of the end of 2003 with average annual increasing rate of 13.6%. The total volume of net assets was 5,390 billion RMB, which increased by 49.7% compared with that of the end of 2003 with average annual increasing rate of 14.4%. After the SASAC was founded, the total assets volume of central enterprises increased by 1,300 billion RMB per year on average during the first term of 3 years. The sales income increased by 1,200 billion RMB per year on average. The realized profits increased by 150 billion RMB per year on average. The turned in tax increased by 100 billion RMB per year on average. According to primary calculations, the maintaining and increasing value rate of state-owned assets was up to 144.7%.

In 2006, 21 central enterprises had sales income more than 100 billion RMB and 13 enterprises had profits more than 10 billion RMB, which increased by 12 and 7 respectively compared with 2003. 13 central enterprises were list in world top 500 published in 2006, which increased by 7 compared with 2003. The Baoshan iron and steel plant Corporation (Group), as a manufacturing enterprise, was list in world top 500 for 3 years in succession, ranking from the 372nd in 2004 to the 296th. The China Petrochemical Corporation, China Natural Petroleum Corporation and China Mobile Communications Corporation ranked from 70th, 69th and 230th in 2002 to 23rd, 39th and 202nd respectively. It was the first time for China Railway Engineering Corporation, China Railway Construction Corporation and China State Construction Engineering Corporation to be list in the world top 500. The global top 2000 listing enterprises published by Forbes were calculated by the aggregate value of listed stock, sales volume, profits and assets. In 2006, 3 central enterprises were list in the top 100. China Natural Petroleum Corporation ranked in the 41st and China Petrochemical Corporation ranked in the 71st. China Mobile Communications Corporation ranked in the 89th, which is the listed enterprise with the highest ranking in Hong Kong market.

The central enterprises develop fast as well as play an important role in implementing national macro adjustment policy, guaranteeing the market supply and promoting national economy to develop continuously, fast, healthily and harmoniously and give active contributions to economic and social development.

When the situation of domestic product oil price lower than import product oil price was serious, petroleum and petrochemical enterprises made efforts to strengthen management, reduce costs and guarantee steady supply of domestic product oil. The electric power enterprises enhanced reconstruction of electric network, accelerated the development of rural electricity industry, promoted “Every Family Energized” project in all-round way and guaranteed the electricity supply. The telecommunication enterprises implemented “Every Village Energized” project and played an importation role in the economic and social information construction. The military enterprise deepened the reform, accelerated technical innovation, completed military scientific research and production in time with both quality and quantity guaranteed and give important contributions to national defense modernization. The central enterprises in other industries such as architecture, building materials and commercial business also devoted important contributions in undertaking national key construction projects and stabilizing the market.

In recent years, the state-owned enterprises carefully implemented the spirit of the 16th National Congress of CPC and every plenary session, realized a series of important disposals about state-owned assets management system reform and state-owned enterprise reform by the Central Party Committee and the State Council, grasped key links such as reform, readjustment, innovation and management, did a number of solid and effective jobs and promoted the enterprise development and economic benefits to increase in large breadth.

1. Deepening reform provides enterprise development with strong impetus.

The state-owned enterprises put deepening reform in the outstanding position among all the jobs. Around enterprise development, promoting shareholding system reform, perfecting corporate management structure and deepening three system reforms brought enterprise operation system with profound changes and provided enterprise development with strong impetus. The number proportion of central enterprises and their subsidiary corporatizing and shareholding enterprises increased from 30.4% in 2002 to 64.2%. Since 2003, 33 central enterprises have issued stocks for the first time at home or abroad and listed. The large scale enterprises in petrochemical, telecommunication, transportation and metallurgy industries have already realized the listing of assets of major business at home or abroad. By the end of 2006, the number of controlling companies of central enterprises listing at home was 194 with total capital volume of 321.1 billion RMB, total market capitalization of 2,332,300 million RMB and circulation market capitalization of 640,500 million RMB, which accounted for 14% of the total number, 22% of the total capital volume, 26% of the total maretk capitalization and 27% of the circulation market capitalization of all the listing companies at home respectively. The number of controlling companies listing in Hong Kong was 57. The circulation total capital volume and market capitalization accounted for 26% and 18% of the sum of all the listing companies in Hong Kong. A number of listing companies controlled by central enterprises have become the nucleus of market blue chips. 19 enterprises including Baogang Group and Shenhua Group carried out directorate pilots according to “Company Law”. 66 outside directors were selected. Among them, the number of outside directors in 14 pilot enterprises is up to or exceeds the half of members at directorate, which realized separation of decisive level and implementing level in the enterprise and promoted the perfect of corporate management structure. Most central enterprises strengthened reform in labor, human resource and distribution system. At present, the number of operation management talents on each level selected in the market-oriented way accounts for about 30% of the total number. A batch of enterprises established perfect and effective system with open recruitment to the society, all staff competition for positions, quantized examination, elimination of the last one, and income distribution related with performances.

2. The structural adjustment brings enterprises with new vigor.

The state-owned enterprises focused on strengthening major businesses, carrying out adjustment and reorganization actively, reducing management chain, reforming system and separating auxiliary businesses. The development of enterprises appeared new vigor. Based on the major businesses, the central enterprises take the market as orientation, base on optimizing and allocating resources, strengthen the major businesses and enhance the strength on adjustment and reorganization. 77 central enterprises have participated in 41 times reorganization since SASAC was founded. And the number of enterprises reduced from 196 to 157. A batch of scientific and research institutions joined in industrial corporations, which realized the combination of production and research and improved the capacity of technical innovation. Some advanced enterprises joined together to form large scale group corporations with relatively strong comprehensive competitiveness. Some “windows” companies were merged into large scale leading enterprises which improved the capacity in exploration and competition in the overseas markets. Some enterprises with related industrial chain were merged and reorganized, which promoted the integration of business chain of central enterprises and exerted the harmonious and complementary functions. Some enterprises with difficulties turned losses into gains and appeared new vigor by reorganization. Many central enterprises separated and reorganized non major businesses which enhanced the competitiveness of major businesses. The local governments also strengthened the layout and structural adjustment of state-owned economy considering practical conditions and centralized state-owned capitals towards industries related to national economic lifeline and advantageous fields and enterprises. In the past, the internal structure of some state-owned enterprises was disordered and the management chain was too long. The subsidiary companies on the fourth and fifth level of some enterprises were totally out of control and became the severe fields with low efficiency, loss of state-owned assets and corruption. In recent years, the central enterprises strengthened on internal structural adjustment, cleaned up various investments, compressed management chain and actively promoted separation of major and auxiliary businesses and auxiliary business reform. So far, most enterprises have compressed administrative level into 3 levels.

3. The technical improvement brings enterprise development with new increasing point.

Around industrial development and market demand, the state-owned enterprises actively promoted self innovation, further strengthened investment in scientific and technical development and developed a batch of new technologies and products with international or domestic leading level, which not only provided structural adjustment and industrial update with powerful technical support but also provided enterprise development with new increasing point. In recent years, the central enterprises accounted for large share in National Prize for Progress in Science and Technology. In 2006, the central enterprises were awarded 64 national prizes for progress in science and technology, accounting for about 1/3 of the total prizes. The only special prize for progress in science and technology was awarded to No. 1 Group Company of China Aircraft Industry for “J-10 project”. As the third generation of fighter independently developed by our country, J-10 broke through a series of aviation key technologies and met the tactical requirements of global leading level. The technical innovation achievements of a batch of central enterprises have already given significant contributions to national defense construction and important project construction. The military enterprises promoted scientific and technical innovation in national defense key technical fields and obtained a batch of important technical achievements. “Shenzhou” series manned spacecrafts are the apotheosis of Chinese integrated innovation. Qinshan stage-2 600,000 kilowatts commercial nuclear power station, which was constructed depending on independent innovation and design, explored a new way for nuclear power independent development. The industrialization of 3G international standard TD-SCDMA, proposed by the telecom science and technology R & D institute, have obtained breakthrough and reached commercial level. The technical level and international competitiveness of China State Shipbuilding Corporation and China Shipbuilding Industry Corporation were increased obviously. China has become the second shipbuilding country exceeding Japan in the world. The scientific research and design enterprises undertook the research, development and design tasks of the public and key technologies in industries and obtained a batch of scientific research achievements, which actively contributed to the technology improvement in various industries. The technical innovation achievements of central enterprises played a significant role in important projects such as Qinghai-Tibet railway project, Three Gorges Project and construction of stadium and gymnasium for the Olympic Games and gave outstanding contributions to Chinese remarkable projects.

4. Strengthening management provides enterprise development with solid foundations.

The state-owned enterprises actively promoted management innovation, strengthened property right management, financial capital management, cost management and strategic planning management, enhanced the management to the whole progress of investment and actively carried out jobs on energy-saving and consumption-reducing. Aiming to the large breadth of enterprise management and weak control of group companies, most central enterprises adopted active measures to enhance group control and the capacity to resist risks. The arbitrary investment, assurance and bank loan were restricted basically. The enterprise management changes from extensive mode to intensive mode gradually. The management level was increased greatly. China Natural Petroleum Corporation adopts capitals centralized management. More than 8,000 bank accounts were cleaned up, withdrew and merged. The scale of debts was reduced by 100 billion RMB. And the saved capital cost was more than ten billion RMB. China Petrochemical Corporation implemented “sunshine project” in materials purchasing. 5,000 kinds of materials were purchased via internet, which accumulatively saved capitals of 10 billion RMB. China Mobile Communications Corporation carried out price comparison of communication equipment in the purchasing management in the whole system. The purchasing cost reduced by about 30%. Baogang Group implemented 260 intensive management items during the last 3 years, which gained financial benefits of 1.2 billion RMB. China Netcommunication Group Corporation finished internal control system construction for 147 institutions during nearly 3 years, carded 6920 internal control procedures and tested almost 16,000 key control movements. Recently, its subsidiary corporation passed the internal control audit carried out by PWC with testing result of zero defects and passed the Item 404 of American Sarbanes Bill.

The reason why state-owned enterprises obtained such satisfying achievements in reform and development in recent years is the correct lead of the Central Party Committee and the State Council, active efforts of enterprises, and perfect of management system of state-owned assets and strength of supervision to state-owned assets.

First, the management system reform of state-owned assets realized “separation of government and enterprise” and “separation of government and capitals” in the institution setting. Non-separation of government and enterprise and non-separation of government and capitals will result in emphasizing approval and disdaining returns, which is the important reason of bad management of state-owned enterprises. After the 16th National Congress of CPC, the Central Party Committee and the State Council determined to establish SASAC, which fulfils the functions of investor to the central enterprises and doesn’t fulfill the functions of government social public management. And it is defined that other departments in government and institutions don’t fulfill the functions of investor to the state-owned assets. After the foundation of SASAC, it was the first time to realize separation of government and enterprise and separation of government and capitals in the institution setting. It realized the separation of government public management function with investor functions to state-owned assets on the level of government. In recent years, we grasped the orientation of investor functions, fulfilled functions according to laws, maintained the interests of owners, guaranteed enterprises to have various rights legally as the main body of market, and fully respected operation autonomy of enterprises and property right of corporates. The new management system of state-owned assets was also fully recognized by enterprises. A series of reform, adjustment and supervision measures issued by the SASAC were supported by enterprises.

Second, the management system reform of state-owned assets made the responsibility of value maintaining and increasing to be implemented effectively. In the past, it was “nine dragons control the water”. The state-owned enterprises are managed by many departments. But there is no one responsible for the value maintaining and increasing of state-owned enterprises. The multi-head management and policies issued by multiple departments will result in emphasizing approval and disdaining responsibility. The leaders of enterprises are assigned without specified terms. They have headship without strict examination. Their payment isn’t related to performances. The state-owned enterprises are lack of fixed restrictions. The payments are equal when one does more or less. After the foundation, SASAC always put responsibility in the outstanding position, implemented responsibility by establishing performance examination system, gradually standardized payment and related rewards and punishments with performances in order to from operation system of responsibility implementation uniform with pressure transfer. When investor is in position, paying attention to returns and responsibility can implement the responsibility of value maintaining and increasing of state-owned assets well. Both leaders and employers in enterprises work hard. The activity is exerted fully. It is the important reason that economic benefits of central enterprises increased greatly in recent years.

Third, the management system reform of state-owned enterprises strengthened the supervision and control of state-owned assets practically. In the past, the state-owned enterprises were distributed in many departments of the government. The policies were issued by many departments. However, these departments fulfilled functions of both public management and investor. These two functions were mixed. The result must be emphasizing approval and disdaining supervision. During the enterprise system reform and property right transfer, the problem of state-owned assets loss was very obvious, which was once the focus paid attention by the National People's Congress, CPPCC and various circles of society. The SASAC is the investor representative of state-owned assets. Its basic function is to supervise state-owned assets and realize value maintaining and increasing. In recent years, we established a series of regulations in strengthening enterprise financial supervision, property right management and transfer, investment and financing decision and high risk control and strictly supervised and implemented these regulations, promoted to establish and perfect enterprise internal management system, restricted the loss of state-owned assets and protected national benefits and employer legal benefits. Meanwhile, supervision system with board of supervisors, discipline inspection and supervision and audit supervision cooperating closely was perfected. The supervision to state-owned assets was strengthened effectively.

It is proved by the reform practices during these 4 years that the decision on management system reform of state-owned assets made on the 16th National Congress of CPC is totally correct. The established principle of “integrating rights, obligation and responsibility, combining management of assets, staff and incidents” is also totally correct. Whether enterprises operate well or not doesn’t have necessary relation with the form of ownership. If enterprises obey developing regulations, they will operate well. In terms of a series of guidance and policies issued by the Central Party Committee and the State Council after the 16th National Congress of CPC, they should be continued to promote firmly, perfected continuously and implemented unswervingly.