SCIO briefing on reform of SOEs

Speaker:

Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission of the State Council

Chairperson:

Hu Kaihong, spokesperson of the State Council Information Office

Date:

Sept. 28, 2017

Hu Kaihong, spokesperson of the State Council Information Office. [Photo/China.org.cn]

Hu Kaihong:

Ladies and gentlemen, good morning. Welcome to the press conference. As we know, many people are paying close attention to the reform of state-owned enterprises (SOEs), and are eager to know what has happened so far.

Today, we are delighted to invite Mr. Xiao Yaqing, the chairman of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council, to introduce the progress of reforms since the 18th National Congress of the Communist Party of China (CPC). He will also answer some of your questions.

Also present at the press conference are: Ms. Huang Danhua, SASAC vice chairwoman, and Mr. Peng Huagang, SASAC deputy secretary-general and spokesperson.

Now, let's welcome Mr. Xiao Yaqing to make his briefing.

Xiao Yaqing:

Thank you. Ladies and gentlemen, good morning. It's a great pleasure for me to be here with you.

Now, I would like to present a brief introduction to the reform of SOEs, especially centrally-administered SOEs, since the 18th CPC National Congress.

The CPC Central Committee attaches great importance to the reform and development of SOEs. Since the 18th CPC National Congress in 2012, the CPC Central Committee with Comrade Xi Jinping at its core has specified the direction and plans for the reform. The Committee pushed it forward with unprecedented determination and strength, as demonstrated by the series of major decisions it has made. General Secretary Xi Jinping has given a number of important speeches and instructions on the direction of the reform. Premier Li Keqiang has also clarified on multiple occasions the requirements for the reform and development of SOEs.

Subdivisions of the SASAC at every level and all SOEs, especially those centrally-administered SOEs, have worked in accordance with these plans and requirements. Remarkable results have been achieved in comprehensively advancing the reform and making breakthroughs in key areas.

Over the past five years, we have essentially completed top-level design of SOE reform and paid extra attention to implementing systematic, integrated and coordinated reforms. The Party Central Committee and the State Council have put in place a framework that consists of the Guidelines on Deepening Reform of SOEs as well as 22 supplementary documents, which have played an important role in guiding and leading practice at the grassroots level. Central and local SOEs have kept to a problem-oriented approach, adopted work plans and detailed implementation rules in view of their own circumstances, and intensified reform of SOEs.

In the five years, significant measures for SOE reform were implemented one by one. Breakthroughs occurred continually in regard to those key and difficult issues. Centrally-administered SOEs' classification reform was carried out comprehensively so that their functions were defined more precisely. There were 10 pilot reforms, all of which made significant progress and established many precedents and experiences that can be copied and replicated. More than 90 percent of the SOEs have undergone corporate system reform, along with about 92 percent of the branches and subsidiary companies under centrally-administered SOEs. Mixed ownership reform was carried forward in a stable way, and more than two-thirds of the central enterprises have introduced or are in the process of introducing capital from various social source in order to promote shareholding diversity. The regrouping and integration of SOEs is also been advanced in a significant way. The SOE structure is constantly being optimized through regrouping of the State-owned capital layout. The three key institutional reforms have achieved further progress. The supervisory function related to State-owned assets was further transformed, with continuously strengthened oversight. Party building was enhanced comprehensively, providing solid assurances for the development and reform of SOEs.

During the past five years, the SOEs have made big strides while gradually releasing the reform dividends. They have improved the market-oriented institution during the ongoing reforms, exemplified by the intensified operational controls of the centrally-administered ones, the quality, efficacy and vitality of which have continuously progressed.

By 2016, the aggregate assets of the centrally-administered SOEs grew to 50.5 trillion yuan, an 80 percent surge compared to the previous Five-Year Plan. Meanwhile, benefits over the five years reached 6.4 trillion, up 30.6 percent from their last quintuple effort, registering comparatively high growth.

The amount of taxes and fees paid was 10.3 trillion yuan in 2016, up 63.5 percent, and the good momentum was sustained in the first eight months of this year. The centrally-administered SOEs have secured historically high year-on-year growth represented by the 15.7 percent increase in revenues and 17.3 percent surge in gross profits.

The achievements made in the reform and development of SOEs has well proven the brilliance and correctness of the CPC Central Committee's policies on SOE reforms. These reforms and policies are completely in line with China's national conditions and market economy laws as well as the laws of corporate growth, and have won the sincere support and enthusiastic participation of SOE staff.

Meanwhile, we also know that the SOE reform has a long way to go. We have a lot of work to do to implement the requirements by the central government. Standing at a new higher starting point, we will double our effort in further deepening and implementing reforms and finding solutions to problems. We will push through the reform of SOEs to make them stronger, better and larger.

Now, my colleagues and I would like to take your questions.

Hu Kaihong:

Thank you, Mr. Xiao. Now, the floor is open for questions. Please identify yourself before asking your question.

China Central Television (CCTV) News Program Center:

Since the 18th CPC National Congress, the CPC Central Committee and the central government have issued a series of documents to promote reforms of central SOEs - the priority of economic structural reform. What efforts have the State-owned Assets Supervision and Administration Commission of the State Council and central enterprises made to implement those documents? What effects have been delivered? Thank you.

Xiao Yaqing:

Since the 18th CPC National Congress, the CPC Central Committee with Comrade Xi Jinping at its core has made a series of strategic arrangements. In implementing "1+N" series of documents, both central and local SOEs have undertaken the following work.

First, making a strong push for implementation. In order to implement the "1+N" documents, ministries and commissions introduced a further 102 supportive documents, and local governments also produced a total of 926 supportive documents. Moreover, the central and local SOEs also worked out many implementation programs and detailed procedures according to their own needs.

Second, they launched various pilot programs. The pilot programs in 18 central SOEs are progressing well. China Central Television (CCTV) covered developments of the central SOEs pilot programs via several of its channels and People's Daily as well as other media also introduced their best practices.

Third, best practices are chosen to lead the way. In implementing the "1+N" documents, especially in various pilot programs, we undertake timely summarization and try to scale up the best practices that have emerged. At the same time, we are constantly learning lessons from dealing with new problems and challenges, so as to further promote reform.

Fourth, there is a strong focus on monitoring and assessment. During the reform, we are paying special attention to monitoring, reviewing and assessment of the results in order to ensure public satisfaction and drive the reform program forward.

As for the results of our efforts, firstly, great progress has been made in system and institutional reform. More than 68 percent of central SOEs have finished their process of mixed ownership reform, a total of 83 central SOEs have regulated the establishment of a board of directors and 92 percent of local SOEs have established a board of directors. Many central SOEs have reduced employees in their headquarters.

Secondly, the process of structural adjustment of the state-owned economy has been optimized and improved. Since the 18th CPC National Congress, 34 central SOEs have been merged, the number of central SOEs has been cut from 117 to 98 and a total of 136 provincial SOEs have started to merge. After the structural adjustment, the assets of SOEs are optimized and the development goals of SOEs are clear.

Thirdly, the system of assets supervision has been improved. We have accelerated the transition of our functions by focusing on capital management. Forty-three functions of the State-owned Assets Supervision and Administration Commission of the State Council have been cancelled and decentralized, while 563 functions of local State-owned Assets Supervision and Administration Commission of the State Council have been decentralized. There are ten pilot companies chosen from investment companies and operating companies of central SOEs with 18 functions being decentralized. Meanwhile, we have strengthened state-asset supervision to prevent the loss of state-owned assets.

Meanwhile, the leadership of CPC in SOEs has been strengthened through the reform.

To sum up, the reform facilitates the development of central SOEs. Without the reform and the leadership of the CPC, it will be difficult for central SOEs to achieve a great performance in 2017.

China Daily:

The central government has vowed to further boost supply-side structural reform to promote long-term, sustainable economic development. Since the reform involves a wide variety of issues, could you tell us what is the main focus for the central SOEs? Thank you.

Xiao Yaqing:

Implementing supply-side reform is a major strategic decision of the central authorities. Central SOEs have resolutely carried out the reforms and greatly benefitted from them.

The following are some of the main aspects.

First, taking the lead in reducing excessive production capacity. Central SOEs, especially those in the steel and coal sectors, achieved their goal ahead of schedule and, indeed, beyond expectations, in 2016 and continuing in the first eight months of this year.

Last year, the amount of overcapacity cut by the central SOEs in the steel industry accounted for 80 percent of the industry total. Meanwhile, in the coal industry, the central SOEs cut overcapacity by 200 million tons, or 73 percent of the industry total. In the first eight months this year, enterprises in the two sectors undertook further cuts in their overcapacity of 16.14 million tons and 55.10 million tons respectively.

Besides, small coal companies under the central SOEs, with a total production capacity of some 100 million tons, were either shut down or integrated.

The second area involves addressing the problem of "zombie enterprises". A total of 500 "zombie enterprises" of those in serious trouble achieved rectification, reducing annual losses of companies directly under the central SOEs by 88.5 billion yuan.

The third focus is reducing leverage and debt. A risk control system is taking shape and has achieved positive initial results. The system sets the debt alarm level for enterprises in different industries, monitors and controls operations of heavily indebted enterprises, and curbs issuance of bonds by such companies. At the end of August, the average debt to asset ratio fell by 0.2 percentage point to 66.5 percent.

Fourth, efforts were undertaken to further streamline the organizational structure. They focused on redundant and overlapping departments in central SOEs. Unprecedented efforts have been made in the past year and achieved remarkable results, with 6,395 departments shut down, and the posts of 6,395 general managers and an even larger number of deputy general managers abolished.

Fifth, there was also a significant focus on resolving long-lasting problems. Pilot programs have been launched to relieve enterprises of the burden of providing water, electricity, heating, gas, and property management services to employees, and to improve the service system covering retired employees.

The economic structure has noticeably improved as a result of supply-side structural reform. As was just mentioned, when carrying out reform, we obviously favor emerging industries of strategic importance and those that have a bearing on the national economy and people's livelihood.

On the whole, the reform has contributed to the development of central SOEs, especially in ensuring their development becomes more sustainable, market-oriented and in line with the expectations of the people. However, the reform needs to go deeper in a number of aspects, and we are undertaking studies and improvements in this regard. At any rate, we will continue the reform among central SOEs to help elevate the Chinese economy to the medium-to-high level.

NHK:

In June, the People's Daily reported that the building of Party organizations had been written into the regulations of more than 3,000 enterprises. Would you please briefly explain this?

Xiao Yaqing:

We appreciate our foreign friends' concern about Party building in SOEs.

Party building and the Party's leadership are a unique political advantage of SOEs, because all their progress has been made under the Party's leadership. For an enterprise with good management and strong competitive strength, the building of its team and top-level managers must be excellent as well. The leadership of the Party plays a very important role in the building of an enterprise's team and its top-level managers.

To give full play of the Party's leadership and its core political role, SOEs should stick to the political principle that all SOEs must be under the Party's leadership, and stick to the ultimate goal of establishing a modern enterprise system. The leadership of the Party should be emphasized during the improvement of SOEs' governance system.

Currently, 98 central SOEs have written Party building into their regulations. Notably, the responsibilities of two positions, the secretary of Party committee and the chairman of the board of directors, are borne by one person. This arrangement will strengthen the governance of enterprises.

In addition, Party building is strengthened during reforms. A series of measures have been taken to implement the responsibility system and simultaneously build Party organizations and working institutions. The heads and working staff of Party organizations are required to go to their duty posts at the same time. Party works are required to focus on enterprises' main business. As a result, the Party works and business operation of enterprises are integrated.

Another important point of Party building is to develop a team of enterprise leaders. We select personnel who possess management capabilities and are innovative, honest, just, and loyal to the Party. They are recruited into the management of SOEs, especially top-level management, so as to train and develop an excellent team of entrepreneurs.

On the other hand, to strengthen Party building within SOEs, we must unswervingly advance clean governance and anti-corruption work. Since the 18th CPC National Congress, we have worked hard in this regard, and achieved unprecedented results.

While deepening the reform of SOEs and increasing the value of State assets, we have strengthened anti-corruption work, which is the guarantee of success of all other works. After the 18th CPC National Congress, three rounds of nation-wide inspections were undertaken. Central SOEs removed a group of corrupt officials and closed loopholes to prevent the loss of State assets. More importantly, by strengthening the work of Party building, we have closed loopholes in the supervision and management system of State assets, thus ensuring the supervision system is sound and effective.

By upholding CPC leadership in SOEs, we should take improving enterprise efficiency and performance as the starting point and the ultimate goal of all Party building work, and treat the fruits of our reforms as a litmus test of the success of Party building. We can already see that enterprises able to undertake a better job in Party building possess a more vibrant staff and a better relationship between administrative personnel and common workers, so as to achieve stronger performance and greater competitiveness.

Japanese enterprises are famous for their unique business culture and personnel management. They have always placed great importance on team construction. Many of their ideas are worth learning.

In conclusion, Party building is an important foundation of SOE reform and development. It provides strong political support for raising the overall competitiveness of SOEs. Thank you.

Bloomberg:

SOE mergers have been used to build single, large, powerful national champions, and this is happening with automobile builders and others. Can you tell us what are the next sectors to become the focus of mergers, and would shipbuilding be one of those, with Beichuan (China Shipbuilding Industry Corporation) and Nanchuan (China State Shipbuilding Corporation) involved?

Xiao Yaqing:

Anything can happen. I would like to ask Ms. Huang Danhua to answer your question.

Huang Danhua:

Thanks, Mr. Xiao, and thanks to the Bloomberg reporter for your concerns about the restructuring of central SOEs.

The restructuring of central SOEs is pressing ahead as part of the CPC Central Committee and the central government's strategic layout to reinforce SOE reform, a big move for SOEs to increase their competence and competitiveness.

Since the 18th CPC National Congress, the State-owned Assets Supervision and Administration Commission of the State Council has coordinated efforts with the pertinent authorities to restructure 34 central SOEs, including China North Railway, China South Railway, Baosteel Group, Wuhan Iron and Steel Corporation and China COSCO Shipping Corporation Limited.

In keeping up with the needs of the times, we have jointly founded the Aero Engine Corporation of China and China Tower, and the number of central SOEs has now amounted to 98.

Yesterday (Sept. 27), the State Council released a statement about work in the next phase after hearing the report on what had been done so far in regard to the restructuring of central SOEs.

The Bloomberg reporter just asked what we will do next. Actually, the State Council has made that clear at yesterday's executive meeting. All we need to do is to continue to fulfill the decisions.

As for the integration effect the journalist just mentioned, I think it is comprised of many facets rather than merely integration. Thus, the integration effect is shown in the following aspects:

First, horizontal mergers strengthen the enterprises' scales. In 2017, a total of 48 central SOEs were included on the list of the Fortune 500 globally, significantly improving their leading role and influence in the industry.

Vertical partnership generates complementary advantages and improved upstream-downstream coordination of the industry chain. It explores ways to solve long-existing problems in the development of some industries and greatly enhances the overall strengths of enterprises.

Integration also optimizes the allocation of resources. It increases the level of resource sharing and cuts off redundant projects. It saves investment as well as land, and also protects the environment.

Second, as far as structure optimization is concerned, the restructuring and integration of central SOEs speeds up excess capacity cuts, improves the technological innovation of enterprises by integrating their complementary advantages, cuts managing and operational costs, and steadily increases their economic benefits.

Third, integration has had remarkable effects for individual enterprises. Their main business is more prominent. Their organization and structure are more streamlined, and their internal management is more efficient. More efforts are made in the coordination of enterprises and other reform work.

Therefore, we should view the effects of structural optimization and integration from multiple dimensions. Practices over the years show that the restructuring and integration of central SOEs is not aimed to change their numbers. It mainly aims to optimize resource allocation as well as the layout and structure of the state-owned sector of the economy. It also aims to enhance the overall functioning and efficiency of the state-owned sector of the economy.

Next, we will persist in deepening reforms to further boost the structural optimization, restructuring and integration of central SOEs. We will continue to improve the flow of state-owned capital. We will motivate the central SOEs to strengthen their main business, speed up their transformation and improvement as well as improve their quality and efficiency for better growth. Thank you.

Xiao Yaqing:

Thank you Ms. Huang for your answer. I would like to add that expanding these enterprises is a goal of the restructuring, but it's not the most important one. The problem is that dozens of enterprises are competing in the same industry, thus causing heavy friction between them. However, reducing the overall number is not the most important goal, either.

I think what really matters is developing enterprises that the domestic and international markets need. You mentioned CRRC, which is a large Chinese enterprise. But some world-famous companies, such as Siemens and Alstom, are undergoing restructuring as well. So the development of technology and markets constitutes the strongest driving force behind the restructuring of central SOEs, and we need to adjust the enterprises in line with this development.

In the meantime, restructuring should be combined with reform and opening up. We hope to cooperate with all kinds of companies at home and abroad when advancing the restructuring of central SOEs. Let's work together to accomplish this endeavor. Thank you.

CGTN:

What measures have the SASAC taken to prevent the loss of state assets? What have been the results? Thank you.

Xiao Yaqing:

I am also paying much attention to this issue. Let's invite Mr. Peng to answer this question.

Peng Huagang:

Thank you. We are fully aware that preventing the loss of state assets is an important part as well as a prerequisite of SOE reform - or the reform won't achieve expected result. We can summarize our efforts on this front in the following four aspects.

Firstly, improve the institutional system. In the past two years, we have formulated and improved a total of 27 rules and regulations in monitoring state assets which has laid a solid institutional foundation for our work.

Secondly, set up a closed-loop monitoring system to find problem and address them timely. In recent years, especially last year, the SASAC has set up three monitoring bodies during its functional transformation so that they can synergize with other bodies to facilitate the cycle of investigation, rectification and punishment.

Thirdly, strengthen the supervision in key sectors, in especial, SOEs mergers, equity transactions, and important investment. The supervision of overseas management has been highlighted in our supervision in recent years. We have taken many methods to strengthen the supervision of overseas management of SOEs systematically.

Fourthly, promote SOE's management and investment accountability. Last year, we established a mechanism to investigate and punish SOE management based on investment accountability. We have already investigated and punished relevant officials in the cases of huge losses of state-owned assets in China Railway Materials Company Ltd. and the Metallurgical Corporation of China Ltd according to the mechanism.

Strengthening the supervision of SOEs and preventing the loss of state-owned assets are our major responsibility. We will transform our function and improve our supervision to prevent the loss of state-owned assets. Thank you.

Reuters:

My question concerns the future of SASAC. As the modern enterprise system is fully employed by the central SOEs and mixed ownership is implemented within the corporate structure and completed by the central government companies, what is the future role of the SASAC in your estimation? Thank you.

Xiao Yaqing:

Thanks for your question, which inspires us to further consider the issue.

Speaking of the future, we are, on one hand, full of expectations, while, on the other hand, worry about its uncertainties. However, I agree with you that, with the furthering of the reform process, the central SOEs and other SOEs will definitely keep on changing with a new look, substantial achievements and progressive performance. The transformation is a pathway created by consecutive reforms, a pathway of improved systems and, more importantly, a definite trajectory of corporate progress.

We expect the SOEs, including the central SOEs, to keep on developing in such a way.

Will SASAC have nothing to do, when all SOEs have developed well? Of course, I hope we will have nothing to do. However, as far as I know, SASAC undertakes two important tasks assigned by the central government, which are supervision and administration. Since state-owned assets belong to the public, I think SASAC under the State Council, and SASAC organizations at all levels, are needed to preserve and increase SOE value, prevent losses, and enhance their functions so that SOEs and the related state-owned assets can achieve the optimum level and the most reasonable position in economic competition. In this way, SOEs can serve national development strategies and meet people's aspirations for a better life. The central SOEs should lead by example in this regard. SASAC and the SOEs should work together to fulfill all of their political, economic and social responsibilities.

Looking forward, the better the SOEs develop and the more enabling the market economy environment can become, the greater will be the need for SASAC to play an enhanced role. It should have a better grasp of the market economy, market rules and the laws governing enterprise development so as to enhance its supervision.

With regard to the missions and duties of SOEs and central SOEs, the SASAC also has great responsibilities.

There must be a sound legal and economic growth environment for the enterprises to fulfill their missions and duties -- so such supervision is essential. So far, both developed and emerging economies as well as SOEs and non-state economies are required to be regulated and supervised under the rule-of-law.

Therefore, the point is not to discuss the SASAC's future existence. The biggest pressure for us is how to improve it to let our supervision and regulation help boost the growth of enterprises, implement the national policies and achieve the goals of reforms set by the central government as soon as possible. Thank you.

People's Daily:

My question is about the mixed ownership reform. Last month, telecom carrier China Unicom released its mixed-ownership reform plan, which drew wide attention from the public. Meanwhile, many enterprises have advanced pilot reforms to introduce a mixed ownership structure in different levels and sectors. Could you please give me a briefing about the progress? Which areas will be the next focus? Do you have some specific timetables? And how will the experience of the mixed ownership reform be promoted?

Xiao Yaqing:

The mixed ownership reform is an entry point for reform and a focus of public attention. The pilot reforms are now underway to introduce a mixed ownership structure in various sectors. Now I will invite Mr. Peng to answer your question.

Peng Huagang:

There are three key points in regard to the process of mixed-ownership reform. Firstly, the number of SOEs involved in mixed-ownership reform is increasing. A total of 68.9 percent of central SOEs have initiated mixed-ownership reform, while 47 percent of local SOEs have been involved in that.

Secondly, the level of mixed-ownership reform is being upgraded. As we have seen, third-tier SOEs and those below the third tier were often chosen as pilot companies to undertake reform. In recent years, we have explored ways to facilitate mixed-ownership reform in both second- and third-tier SOEs, even in their headquarters.

Thirdly, the industries covered by mixed-ownership reform have been expanded. A total of 19 central SOEs from key industries have initiated mixed-ownership reform, covering electricity, oil, petrochemical, telecommunications, aviation, and military industries.

Mixed-ownership reform is an important breakthrough in the reform of SOEs. We will continue to promote the reform under the rule of "One Enterprise, One Policy."

Xiao Yaqing:

Apparently, you are eager to know the results of the reform. However, it takes time for the reform of an enterprise's ownership, especially the mixed-ownership reform, to yield results. The time needed can be a product lifecycle or an industry lifecycle. Meanwhile, we should be prepared that the reform won't necessarily succeed, so while looking forward to the results, we should also allow an enterprise time to pursue the reform through trial and error.

Wall Street Journal:

What do you see as the challenges to reforming SOEs, especially in the northeast, both in the medium and long term, and in Liaoning Province in particular? What do you think are the best examples of SOE reform? Can you expound on anything that you see as progress?

Xiao Yaqing:

Thank you for the questions. They cover a wide range of issues. I'll try my best to answer them.

SOEs are faced with many challenges. It's difficult to say which one is the toughest. Actually, all the reforms we just talked about are challenges for SOEs. In my opinion, the most crucial issue is whether the reforms can cope with economic development, and this can be gauged by the performance of SOEs.

I'm fully confident of the result, and I'm eager to see how SOEs will achieve it. There are many challenges and problems ahead. The problems may concern specific issues and general policies, such as government supervision and regulation, and company development strategies. All of the problems will be our targets in reform and will be addressed step by step.

You mentioned SOE reform in northeast China. That is an important topic. The CPC Central Committee has been paying much attention to the economic development of the region, especially its SOE reform. In recent years, the CPC Central Committee and the State Council have introduced many guidelines and supportive policies to rejuvenate the region's economy. I can see that it is now developing at a steady pace. According to my multiple field trips, I've noticed some positive changes in companies there -especially SOEs.

First, much progress has been made in relieving SOEs of their obligation to operate social programs, like the obligation to provide water, electricity, heating, gas and property management services to their employees' homes. Second, SOEs in northeast China are also proactively transforming themselves.

Third, as an old industrial base, northeast China is home to many heavy industries. But it is now shifting toward robotics, software design and modern logistics, among other new and strategic industries.

For example, the reform of pharmaceutical companies in Liaoning Province has achieved considerable results in terms of effective management and relieving their obligations in social programs. The restructuring of Dongbei Special Steel Group, which is a typical case, is so far quite successful considering its difficulties. Of course, there are more cases to demonstrate that northeast China is prospering and we can expect much more from the development of SOEs there. Thank you.

Economic Daily:

CCTV aired a documentary called Amazing China recently. The documentary contains scenes of central SOEs undertaking major projects, which was quite encouraging to watch. It was no less encouraging when we saw the innovative achievements of central SOEs at an ongoing exhibition. My question is to the SASAC: What are the areas where central SOEs have progressed most and what are the underlying reasons. Thank you.

Xiao Yaqing:

The exhibition you mentioned is a collective one staged by all the central SOEs to display their achievements in innovation. Thanks for your attention. Ms. Huang Danhua will answer your question.

Huang Danhua:

Thanks for your concern about the central SOEs' innovation efforts. As you mentioned just now, Amazing China is indeed very thrilling and encouraging. Many roads, bridges, harbors and networks that appear in the documentary were built by central SOEs with the application of major sci-tech innovations. Since the 18th CPC National Congress in 2012, the central SOEs have earnestly pursued innovation-driven development and seized the opportunities brought by the global technological revolution and industrial transformation. Their enhanced endeavors to make original, independent and collaborative innovations have delivered remarkable results. There are four aspects I'd like to mention here.

First, we have made multiple major scientific and technological breakthroughs at the world's most advanced levels. The manned spaceflight, submersible deep ocean exploration, high-speed railway, UHV transmission, mobile communication, domestically manufactured aircraft carrier launched this year and the homegrown large passenger aircraft which made its maiden flight this year. They are the world's top-notch technologies.

Second, we have many farsighted and groundbreaking scientific and technological innovations which have reinforced the industrial developments. They, as we know, include the Hong Kong-Zhuhai-Macao Bridge, the "No.1 Blue Whale" Deep Water Drilling Platform and the Beidou Navigation Satellite System, signaling our great achievements.

At the same time, the exploration of shale gas, the mining of combustible ice and the space-ground integrated information network, let alone the nuclear reactor and new carrier rockets, all have driven China towards the high-end of the industrial chain.

Third, there are lots of platforms which have supported entrepreneurship and the innovative aspiration of the entire Chinese society. The central SOEs have created 518 pertinent platforms involving a number of brilliant organizations, such as, Casicould, Avicui.com, Ouyeel and Shining Star Innovation, which have pooled social resources to ramp up innovation nationwide.

With its interconnection between big, medium and small enterprises, the new development model has created 6 million jobs and amassed innumerable resources, funds and knowledge for the innovative society where central SOEs have played a leading role.

Fourth, the central SOEs have formed a major force behind the nationwide drive of innovation. I'll reveal a group of data to show how the central SOEs are involved, in regard to funds and personnel for innovation. By 2016, the central SOEs have 808,000 people engaged in R&D. Besides, they have hired 226 academicians from the Chinese Academy of Sciences and Chinese Academy of Social Sciences. They have established 632 country-level R&D platforms and hold 486,000 valid patents.

The sci-tech progress awards and invention awards won by central SOEs accounted for one third of the national total, and the proportion was even higher in terms of special prizes and first placed prizes. Over the past five years, central SOEs invested 1.7 trillion yuan, or one-fourth of the national total, in sci-tech development, and won 424 national awards, accounting for one third of the national total. Generally speaking, great efforts have been made in deepening reform, intensifying innovation and cultivating talents.

In the next step, we will further implement the national strategy of innovation-driven development, and help central SOEs to make a greater contribution in making China an innovative country and strong sci-tech power in the world. Thank you.

Die Welt:

I read in your report that the number of central SOEs has decreased from over 170 to 98 in the past five years. Will the number continue to be fall in the next five years? Is there a target? Since the borrowings by SOEs account for about 60 percent of total corporate debt, is there a target of debt reduction for the next five years? What measures will be taken to meet the target?

Xiao Yaqing:

As to the number of central SOEs, Ms. Huang has already elaborated on this. Unprecedented efforts have been channeled into the restructuring of central SOEs in the past five years delivering obvious effects. As I have mentioned, we will not be taking the reduction in numbers or the size of any expansion as set goals. Instead, we will set the pace of restructuring on the basis of the needs of domestic and international markets, as well as the development trends of certain industries. Therefore, we will focus on enhancing enterprise core competitiveness and management level as well as raising the returns in regard to the preservation and increased value of State-owned assets. We will advance the restructuring process according to the laws governing scientific and market development and the demands of technology innovation.

Your second question is about corporate debt. At the end of 2016, the debt ratio of the central SOEs stood at at 66.7 percent. This was moderate compared with other countries. Over the past five years, the ratio has remained stable, rising slightly by 0.4 percentage point to 66.7 percent in 2016 from 66.3 percent in 2012.

To curb the rise of this ratio, a major approach is to intensify supply-side structural reform and structural adjustment.

Presently, the debt risk of the central SOEs is completely under control, as shown by the statistics I just mentioned. The enterprises are operating well. This means the risk has been reduced. So far this year, the central SOEs have maintained the positive growth momentum seen in the fourth quarter of last year, while a particularly rapid growth rate is appearing in the major sectors and among the large SOEs.

New York Times:

Regarding the merger of large SOEs, why does the government think that this is in line with the law of the market economy? Why not let the market decide? For example, let them take part in the market competition until one of them is shut down. Thank you.

Xiao Yaqing:

Thank you for your question.

Chinese enterprises have been competing in the market. After the 18th National Congress of the CPC, and especially after its third plenary session, the central government stressed that the market plays a decisive role in resource allocation and the government should play a better role in creating the best conditions. In the historical development of China's reform and opening up, a very important experience is that the process should never stop. We have been moving forward and have made remarkable achievements, especially since the 18th National Congress of the CPC. In the market economic context, central SOEs scored prominent achievements, including many innovations, enhancing the effects of mixed ownership reform and other reforms. All these show our success and progress in market-oriented reform.

The growth of an enterprise of any country must be in line with the country's laws and policies. Government regulation helps enterprises improve their competitiveness and develop themselves within the legal framework. The development of a market economy cannot be separated from the legal environment and market cultivation. In my view, the achievements made by Chinese enterprises and fresh and vivid experiences formed in market-oriented development have proven such development is feasible. Therefore, our development will become more international and market-oriented in the future. Thank you.

Hu Kaihong:

The last question.

Market News International:

My question is about mixed-ownership reform. You just mentioned that China is considering introducing the third round of pilot programs in the reform. What specific areas will it cover? Are there more rounds of pilot programs in the pipeline?

There have been some voices complaining that the reform is slow, indecisive and losing momentum. Are there any subtle changes in the government's attitude? Other overseas voices like the AmCham China complain about foreign companies' low access to major areas in China. How do you respond to that? Can foreign companies participate in China's mixed-ownership reform? Thank you.

Xiao Yaqing:

Your question covers many levels, just like the levels in the reform we are carrying out. I will try my best to give you an answer.

The reform to establish mixed-ownership systems is a key area in the reform of SOEs, and we have been firmly pushing it forward. However, the reform of mixed-ownership is only a part of the reform of SOEs, not the whole of it. It should be said that, the reform of mixed-ownership is not suitable for all SOEs.

Take the United States for example. Its enterprises not all feature mixed-ownership. They are not all privately-owned. Some are State-owned and undertake important social responsibilities.

In the reform to establish mixed-ownership systems, we hope that enterprises of different ownerships will learn from each other and play their respective roles so as to better develop SOEs. Many privately-run enterprises in China have excellent decision-making systems and decision-making procedures, as well as excellent management and experience.

Our SOEs have strong cohesiveness and pioneering spirit. Coupled with a sound foundation for development, they can overcome their own weak points by learning from each other's strong points and unite together. The mixed-ownership reform is open as well, just like other reforms.

President Xi Jinping delivered keynote speeches at this year's World Economic Forum in Davos, the Belt and Road Forum for International Cooperation and the 9th BRICS Summit. We have carefully studied these speeches and feel that China's gate for opening up and reform is always open -- this is also our demand for the central and local SOEs and the national assets supervision department. China's SOE reform is an open program that attracts all enterprise of various ownership forms to participate. If foreign enterprises are willing to join in, we also welcome them.

Of course, we hope America will be open to us, and open to our SOEs, as well. We hope the American government look at China's SOEs from a full, correct and objective perspective. The process of opening up must be a win-win, a multi-win situation. The process of reform must be exactly the same. All parties involved should see their interests enlarged and assured during the process of opening up and reform. Mixed ownership reform must continue, and the results and effects of the reform should just keep on emerging, which is something we are greatly anticipating.

Hu Kaihong:

Due to the time limit, today's press conference must end here. Thank you, Mr. Xiao, Ms. Huang and Mr. Peng. Thank you everyone.