zhonghongwang.com:

A key report delivered at the 20th CPC National Congress further stressed that the modern enterprise system with Chinese characteristics should be improved. What achievements has the SASAC made in improving the modern enterprise system with Chinese characteristics in recent years? What is the goal of building the modern enterprise system? Thank you. 

Zhang Yuzhuo:

Thank you. Mr. Weng is responsible for reform affairs, so let's invite him to answer your questions. 

Weng Jieming:

Thank you for your questions. Corporate governance is a common concern of enterprises of all countries. We must accelerate the building of relevant systems based on the realities of both China and enterprises. The CPC's leadership in SOEs is a "major political principle," and this principle must be insisted on, General Secretary Xi Jinping noted at a national meeting on building the role of the Party within SOEs held on Oct. 10, 2016. Reform to establish a modern enterprise system within SOEs should be adhered to as well, Xi said.  These two principles have elevated the modern corporate governance of SOEs with Chinese characteristics to a new height. Centrally administered SOEs have resolutely implemented the two principles in recent years. On the one hand, we uphold and strengthen the Party's overall leadership and keep in the right direction of reforms and development of SOEs. Centrally administered SOEs have incorporated Party building into their provisions, and the secretary of Party committees or leading Party members groups simultaneously serves as chairman of the board. All centrally administered SOEs and 12,600 important subsidiaries have worked out a list of major business management matters for preliminary research and discussion by Party committees or leading Party members groups, which ensures the leading role of Party committees or leading Party members groups in terms of system, organization and procedure. 

On the other hand, we continue to improve the modern enterprise system to effectively promote the efficiency and vitality of SOEs. The status of independent market entities has been strengthened, the reform to convert SOEs into standard companies has been completed in all respects, and the task to relieve enterprises of their obligation to operate social programs is about to be completed. The establishment of boards of directors has been facilitated. Working rules for boards of directors and a series of measures and procedures for recruitment management, remuneration and treatment, and performance support of outside directors have been introduced. The board of directors should be fully established, with a majority of external directors. Important breakthroughs have been made through three institutional reforms. Contractual management for managers of centrally administered SOEs has achieved full coverage of signed contracts. More than 60% of corporate executives are selected through competitions, and medium- and long-term incentives have been expanded and improved, covering 368,000 people in total.

Practice has shown that the modern enterprise system with Chinese characteristics, which is fundamentally characterized by the two principles, meets the requirements of a socialist market economy, is effective and has overall, fundamental and far-reaching significance for SOEs. 

Next, state-owned capital and central SOEs will take the opportunity of a new round of initiatives to deepen and upgrade the reform of SOEs and implement the two principles to better transform the strength of the modern enterprise system with Chinese characteristics into effective governance. First, we will promote the integration of Party leadership into all aspects of corporate governance and classify and dynamically optimize lists of major business management matters for preliminary research and discussion by Party committees or leading Party members groups. Second, we will pay more attention to improving the corporate governance structure. We will strengthen outside director teams by appointing competent board members, ensuring that the board of directors can play a central role in decision-making. We will also implement the mechanism of delegating authority from the board to managers, establish new forms of responsibility systems in operating business, and attract more talent to participate in the governance of SOEs, so that decision-making, governance, and management of enterprises are more in line with the market economy. Third, we will promote entrepreneurship. We will improve training, selection, appointment, assessment and evaluation mechanisms for entrepreneurs of SOEs, and improve material incentives and awards and honors systems. Fourth, we will be more open to strengthening exchanges and mutual learning about corporate governance. We will strengthen exchanges between SOEs and other ownership enterprises regarding equity, operation, governance and human resources to jointly build modern enterprises. 

Thank you.