Editor-in-Chief of Arts/New waves of opinion (Bkopleader)

Real property reform is a more advanced level of openness and reform, and an inherent requirement to increase overall factor productivity. Current reforms have entered deep-water areas, and further promotion of property rights reform is a necessary path towards high-quality development in our country.

Summary

As a fundamental concept of the theory of systemic economics, property rights include, inter alia, ownership, business rights, dispositions, rights of proceeds, etc., in essence, checks and balances of incentives and restraints, reciprocity of risks and benefits, rights and obligations. The principle of representation includes, among other things, the doctrine of stipulation, commission-agent theory and contract theory, the economics of systems stress the importance of identifying property rights and transaction costs as the cornerstone for effective allocation of resources in the market, and the protection of property rights, fair competition, proportionality of benefits and risks, as well as reasonable and appropriate incentive mechanisms, as the backbone for market efficiency.

The reform of our country’s business sector has been divided into three main stages: (a) the process of reform of decentralization and contractual accountability, 1978-1992; (b) the establishment of a modern enterprise system in 1993-2002, the introduction of “cleaner” into a competition phase-out mechanism to enhance market efficiency; and (c) the establishment of a National Finance Committee to regulate and deepen the reform of the property rights regime in 2003 to date. In general, the essence of past national business reforms is the organic combination of internal property reform to increase efficiency and the introduction of competition in open markets. The current state-owned economy has essentially changed to modern enterprises, and incentive mechanisms have been gradually built and efficiency has risen rapidly. In this process, the private economy has also been able to achieve a cross-cutting development, ranging from a small to large scale, with a typical feature of “569”.

Despite significant improvements in the efficiency of national enterprises, which contribute significantly to the State and society, the overall efficiency of business in the country is still lower than that of private and foreign enterprises. Using RROE, ROA as a measure of efficiency, non-national enterprises, with the exception of a few industries, have an efficiency advantage in competitive industries and even some monopolies. In subdistricts, the share of the State-owned asset industry in the province is more relevant than the national share of the GDP of the provinces and municipalities, the higher the overall share of the local State-owned industry and the lower the share of GDP in the country. The lack of property rights has made it difficult for enterprises to become self-employed, self-sustaining market-economy subjects, political entrepreneurship, budgetary constraints, financial resource availability, administrative monopolies, and the lack of adequate incentives for State enterprises to adapt their business strategies and resource allocation in a timely manner, depending on the circumstances of their operations.

Overall, the country’s manufacturing industry is now largely open, dominated by private enterprises and markets are sufficiently competitive, but the upstream factor market countries are relatively high, markets are still more efficient, while services are open and less competitive. China’s current share of capital investment in manufacturing, with State-owned holdings, is around 10 per cent above basic maintenance and is concentrated primarily in upstream factor industries, with some service countries accounting for more than 80 per cent, with capital access restrictions, competition barriers and inadequate regulatory transparency. In specific industries, fully competitive industries, such as textiles, catering, fast-moving, etc., are generally more efficient, factor-produced productivity and international competitiveness of products, while there are administrative controls, monopolistic industries, such as steel, oil, gas, electricity, telecommunications services, finance, education, health services, etc., with social resource mismatches and low overall factor productivity.

The reform of national business has been driven mainly by the reform of the property rights system and the strengthening of competition for productive efficiency reforms. Reform programmes include, among other things, radical “truth therapy”, the “no-prohibition” reform of the archaic “prohibition”, incremental reform, classification reform, mixed ownership reform, and capitalization of big countries. Overall, programmes such as truce therapy and overly radical “no-prohibited” reforms will result in more negative results than expected. From our country’s experience, a series of reforms explores the development of a “progressive + plus + pilot” approach to reform, as well as successful experiences in localizing, business-seeking, market-based competition mechanisms, reforming single State-owned property, strengthening macro-regulation and micro-intervention.

Current reforms have entered deep-water areas, furthering property rights reforms as a necessary path towards high-quality development in our country, which requires that we focus on basic economic systems, based on emancipation and the development of social productivity, in order to enhance the efficiency of State-owned capital, strengthen the vitality of State-owned enterprises, provide clarity on property rights, introduce competition, adopt a rule-of-law business, undertake business-oriented policy, replace effective property rights with ineffective, inefficient property rights, achieve regulatoryization of State-owned corporate governance, marketization of company operations, and internalization of corporate competition.

We propose a “classification + blended plus enhanced competition” programme for national business reform, in particular: the principle of neutrality in competition, based on ideological recognition and expectation of stability, adherence to basic economic systems, equal treatment of national and private economies. The second is the methodological approach of national entrepreneurship reform, which adheres to the “progressive + plus + pilot” approach, the establishment of a mechanism for fair consideration of awards and penalties, the establishment of faulty and “exemption” mechanisms and the enhancement of local motivation. Removal of “state-owned asset loss” in the form of an independent third-party asset assessment body assessing the legitimate value of State-owned assets or an open competitive bidding assignment. The third is the continuation of the reform of the classification of national enterprises, which makes it easier to identify further public goods, resource-based business and competitive business sectors, with full market access and good quality for competitive business. The fourth is to identify areas in which national business should control or participate, to clarify property rights, to promote mixed ownership reforms, to reform the business system and to strengthen full performance appraisal standards. Five are areas in which national enterprises must control or participate, promote intra-State competition reforms, public goods, resource industries or new national enterprises, introduce internal competition in State capital, establish corresponding appraisal mechanisms, entry and exit mechanisms, and establish open, transparent and reasonable criteria for subsidies. The sixth is a concrete step forward in the reform, avoiding “one size fits all” and campaigning, relying more on market-based instruments, improving the system of State-owned regulation and preventing changes in policy implementation.

Risk tips: policy impulses and unanticipated, campaign-oriented reforms open

Contents

1 Basic doctrine 1.1 Title theory 1.2 Basic definition of State business and related title 2 Major course of State business reform 2.1 History of State business reform: Clear title