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You Should Have a Broader Mind on SOE Regulation

To the State-owned Assets Supervision and Administration Commission of the State Council (SASAC),

Congratulations on your forthcoming 10th anniversary! Established in 2003 on the principle of separating government administration from enterprise, SASAC supervises and manages state-owned assets and guides the reform and restructuring of SOEs.

As you represent the state investors, it’s perfectly understandable that you pay so much attention to SOEs' profit margins and state-owned assets. But we expect more; especially when everybody is talking about opening up the energy, resources and telecommunications industries.

The word "monopoly" might immediately come to the public’s mind when seeing the growth in SOEs' profit margins. They might ignore your efforts to establish a principal-agent relationship with SOEs and build an incentive-binding mechanism for them. We know that you're not in a position to single-handedly unravel the monopolies and that you're often made to be a scapegoat.

However, as the government body most closely linked to SOEs, you can do much more than defend those companies. What about strengthening your regulation so as to prevent SOEs from harming the public interest? We have seen too many cases like this.

You can't decide which areas will be opened - whether to loosen control over oil exploitation or the telecom industry for instance - but you do have the power to supervise. We need an optimized system, good services, reasonable distribution of income and resources and transparency. We are counting on you.

The next round of reform on SOEs is underway. We think SOEs should put public services first before making money. So we expect new assessment methods that favor the public interest.

You have frequently mentioned breaking up monopolies and introducing competition. In generally competitive fields like iron, steel, coal and the auto industry, SOEs should gradually retreat from the market. We hope market forces can play a bigger role in the national economy.

Maybe your job requires you to take care of SOEs, but if you can provide a level playing field for both SOEs and private enterprises, that will earn you applause.

Kang Yi (康怡)
Original article: [Chinese]

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