This presentation on the role of state-owned enterprises in economic development in China by Zhengjun ZHANG was made at the OECD Workshop on SOEs in the Development Process held at the OECD Conference Centre in Paris, France, on 4 April 2014. Find out more at http://www.oecd.org/daf/ca/2014-workshop-soe-development-process.htm

1. The Role of State-Owned Enterprises in Economic Development:
Practice in China
Workshop on State-Owned Enterprises in the Development Process
Zhengjun ZHANG
Managing Partner & CEO
KING PARALLEL Consulting
OECD Workshop on SOEs in the Development Process
Paris, France - 4 April, 2014

2. 1. A review on development strategies, policies and industrial policies in China
2. SOEs development stages and current status
3. Public policy functions carried out by SOEs can be observed practically
4. Why relay on SOEs rather than subsidise and regulate private enterprises?
5. Effectiveness, shortcomings, and impacts of SOEs carrying out public policy
functions
6. Other State-controlled entities playing role in development
7. Our conclusion: environment, principles, assessments, and conditions.
2
Contents

3. (1) Development Strategies
Before 1978: to sett up a planned economy, heavy industries was in priority development.
 The fundamental form of industrial layout was established.
After 1978: to establish the socialist market economic system; to build a well-off society.
 The ways of pursuing these goals were also been changed, the government’s focus was
transmitted to “taking economic construction as the center“, and the planned economic
method was replaced by competition and market mechanism, SOEs reform was started.
3
1.A review on development strategies, policies and industrial policies in China

4. (2)Development policies and industrial policies in different period
4
1978-1992 1993-1997 1998-2002 2002-Present
Institu
tions
Debates on
road of China,
and
commodity
economy was
gradually
accepted.
Socialism Market
system; modern
enterprise system;
1st corporate law;
starting to establish
social security
system
Strategic
Transformation as
the directions of
SOEs economy
Upgrading CG rules
for listed firms and
SOEs; new state-asset
administration system.
Marke
ts
Competition
appeared and
increased
Securities market
opened;
Competition
intensified
Ownership
transaction and
market booming;
competition
intensifying
continued
Exploitation of the
west region; breaking
of the obstacles of the
regional market;
multiple-layers of
security markets;
element market
forming
To expand Modern enterprise keeping large New ownership

5. 5
(2) Development policies and industrial policies in different period（continued ）
1978-1992 1993-1997 1998-2002 2002-Present
Other
sorts of
owners
hip
enterpr
ises
gradually eased
limitations on
private firms
development, and
introduced foreign
investments
Fast growing of
private companies
and foreign
companies.
No. and
production values
of private
companies surged;
Listing opened to
some private
firms.
Continue
developed fast;
politically level
underlined to fare
competition among
all sorts of
companies.
Industr
y
policy
Market mechanism
in agriculture and
light industries,
several sub-sectors
in heavy industries
and energy sectors,
are keynotes of
industry policy
Strengthen
fundamental role of
agriculture sector
and infrastructure
sector; speed up
development of
pillar industries;
adjust foreign trade
Promote
infrastructure;
upgrading pillar
industries;
encourage M&A,
corporatizing,
listing and selling
out.
Heavy industry
development;
global manufacture
center; real estate
industry
development and
price regulation;
industry upgrading

6. Contents
6
1. A review on development strategies, policies and industrial policies in China
2. SOEs development stages and current status
3. Public policy functions carried out by SOEs can be observed practically
4. Why relay on SOEs rather than subsidise and regulate private enterprises?
5. Effectiveness, shortcomings, and impacts of SOEs carrying out public policy
functions
6. Other State-controlled entities playing role in development
7. Our conclusion: environment, principles, assessments, and conditions.

7. 2. SOEs development stages and current status
7
1980 1992 1997
22% (Numbers) 20% 18%
81% (Revenue) 65% 44%
84% (Profit) 55% 25%
70% (Employment) 64% 65%
/1998 2002 2010
39% 23% 4.5%
52% 44% 28%
36% 45% 28%
60% 44% 19%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1980 1985 1990 1995 2000 2005 2010
(Numbers) (Revenue) (Profit) (Employment)
Statistic Range
Changed
Stage 1 Stage 2 Stage 3 Stage 4
(1) Development of SOEs in Manufacture Sector

8. 8
Number of subdivided industries dropped into sections in the left
column
Revenue proportion of
SOEs
1993 2005 2009 2012
More than70% 11 5 4 3
50%-70% 10 3 2 4
30%-50% 11 4 4 3
Less than 30% 6 25 27 29
(2) Changes of SOEs distribution in Manufacture Sector

9. Authorizing SOEs rights
No ownership change
Start:
SOEs were factory workshops
Broad social functions
Soft budget constrain
Establishing pro-market
institutions
Large SOEs kept State-owned
Ownership organisation reform
SOEs restructuring: function,
IPO, laid off
Centralized ownership function
Corporate governance reform
The main stream of SOEs reform
and development was trying to
improve efficiency
Results:
SOEs become real companies
with: Profit oriented goals,
Pro-market mechanisms,
Resource advantage, Market
Competition
54 SOEs in Fortune 500 in
2012, while only 3 Chinese
firms in 1995.
 SOEs were the Major actors
of abroad investment
•Let SOE autonomy
•Introducing incentive
•No ownership change
•Market economy orientation
•CG legal Framework
• Stock market providing fuel
• Multi model of ownership
function
•Less administrative function,
Core assets IPO ,Laid off workers
& exit over-capacity
• Control large while free small.
• Centralised model of ownership
function
• BoD system prevailed.
• Strong outside supervisory
(3) Changes of SOEs
9

10. 1978: Deciding
authorizing to SOEs
1979: Deciding let
SOEs keep profits
1983: introducing
business running
contract
1988: Law on
Industrial Enterprises
Owned by the Whole
People
1991, 1992: Opining of two
Stock Exchanges.
1993:Political decision of
building a market Economy;
and to introduce modern
enterprise system
1993: The first Company
Law issued.
Large SOEs kept purely state
owned, while some SM-SOEs
became joint-stock companies.
1997: Political decision gave
permission for SOEs to exit.
1998: Government system
reform, some industrial
ministries dismissed
 1999: Political decision to
set up CG and Multi-
ownership structure in SOEs
2003: Central SASAC
established
2004: Pilot action on Building
BoD in SOEs
2005: Company Law revised
2008 :Law on the State-
Owned Assets of Enterprises
issued.
Until now-days, BoD
establish continued, 52 central
SOEs established BoD
Authorizing SOEs rights
No ownership change
Establishing pro-market
institutions
Large SOEs kept State-owned
Ownership organisation reform
SOEs restructuring: function,
IPO, laid off
Centralized ownership function
Corporate governance reform
(4) Milestones of SOEs reform and development
10

11. 11
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
No.（Thousand） Total Asset(Trillion
Yuan)
Equity (Trillion
Yuan)
Total State-owned
Asset (Trillion Yuan)
Employment No.（
Million）
SASAC SOEs Other Gov. Dept SOEs Local SOEs
124.5 68.6 24.5 18.7 37.6
(5) Status of SOEs in whole economy in 2010
 All SOEs in all society: 1/3 Revenue, 2/5 in profit and taxation
 SOEs in central and local level shows a half and half in gross volume
In Year 2010

12. 12
(6) Status of SOEs in Service Industries in 2010
Non-finance service industry Finance industry
construct
ion
Real
estate
wholesal
e
retail comm
unicati
on
aviatio
n
bankin
g
securities
Revenue
（％）
20
Around
30
27 8 95 80 —— ——
Net profit
（％）
13 —— 33 10 62 91
Total asset
（％）
21
Around
30
31 10 97 57 86
Net asset
（％）
14
Around
30
34 9 97 57 87
Calculated by Mr. Chen Xiaohong, from 2011 China Enterprise Development Report.

13. 13
(7) Sector Distribution of State Assets in All industries in 2010
Industries
State Asset distribution
Industries
State Asset distribution
Total
(BillionYuan)
Proporation
（%）
Total
(BillionYuan)
Proporation
（%）
1、Agriculture, Forestry,
Husbandry, Fishing
2171.7 0.58% 9、Real estate 20430 5.46%
2、Manufacture 14248.8 38.11% 10、IT Service 955 0.26%
3、Construction 14143.8 3.78% 11、Social Service 59011.5 15.78%
4、Geological
Exploitation andWater
Conservancy
1856.2 0.50%
12、Heath, Sports and
Welfare
278.8 0.07%
5、Transportation 62678.8 16.77%
13、Education, Culture
and Media
2941.1 0.79%
6、Warehousing 1140.4 0.31%
14、Scientific Research
andTechnology Service
2219.8 0.59%
7、Post and
telecommunications
33413.1 8.94%
15、Gov. Department,
Society and others
7063.8 1.89%
8、Whole Sell and
Retail, Catering
23060 6.17%

14. 14
Top 10 Subdivision Industries
ProductionValue Assets
Data
（BillionYuan）
Proportion
（%）
Data
（BillionYuan）
Proportion
（%）
Electric Power and Heating 3,742 20.1 6,803 27.5
Transportation Equipment 2,579 13.9 2,595 10.5
Oil Processing and relevant 2,074 11.2 934 3.8
Black Metal 2,019 10.9 2,614 10.6
Coal mining 1,249 6.7 2,191 8.8
Oil Exploitation 939 5.1 1,613 6.5
Chemical Products 925 5 1,219 4.9
Nonferrous Metal 796 4.3 876 3.5
Tobacco 581 3.1 544 2.2
General Equipment 464 2.5 608 2.5
Total of SOEs in the Top 10
Subdivision Industries
15,367 82.8 19,996 80.6
SOEs in all Manufactory 185861 100 247760 100
(8) Subdivision Industries Distribution in Manufacture in 2010

15. Proportion of
SOEs in
Subdivision
Industries
Subdivision Industries in Manufacture
> 50%
Tobacco（99%），Oil & Gas Exploitation（95%），Electric
Power and Heating（92%），Oil Processing and relevant
（71%），Water Supplying（69%），Coal Mining（56%）。
30-50%
Transportation Equipment（47%），Gas Supplying（44%）,
Black Metal（39%）
Nonferrous Metal（28%），Nonferrous Metal Ore（27%），
Special Equipment（22%），Chemical Products（19%），15
(9) SOEs Proportion in Subdivision in Manufacture in 2010

16. Contents
16
1. A review on development strategies, policies and industrial policies in China
2. SOEs development stages and current status
3. Public policy functions carried out by SOEs can be observed practically
4. Why relay on SOEs rather than subsidise and regulate private enterprises?
5. Effectiveness, shortcomings, and impacts of SOEs carrying out public policy
functions
6. Other State-controlled entities playing role in development
7. Our conclusion: environment, principles, assessments, and conditions.

17.  In the past 35 years, the fact that SOEs are the carrier of public policy objectives had never been
clearly announced by Chinese government. Most of the policies were to realize the reform,
reorganization and transformation of SOEs, which enabled them to become qualified part of the
market. Meanwhile the function of SOEs in implementing public policies can be observed.
(1) The SOEs are objects of the reform and transformation, of which the goal is to build up real
market competitive bodies.
(2) Considering the large proportion of SOEs in economy, better performed SOE contributed
greatly to the whole economy growth in China.
(3) The main public policy functions that SOEs undertake includes: to promote economic
development; to take up a dominant position in important sectors; to develop a cooperating and
competitive relationship with non-state-owned enterprises; to avoid abusive usage of the
dominant market position and to reward the society.
3. Public policy functions carried out by SOEs can be observed practically
17

18. 18
continued to previous point (1)
SOEs
Characterist
ics
In 1978 In 2012
Status
There hardly existed privately-
run economy and the output
value of SOEs attained about 78%
Publicly-owned enterprises
almost accounted for 99.9% of
the total industrial and
commercial enterprises
the proportion in number of SOEs in the field of
industry decreased to 5%; revenue and profit
accounted for about 1/4
In service industry, the revenue proportion of
SOEs in construction, business, and real estate
was not high, while in communication, aviation,
publishing and finance industries, the revenue
proportion of SOEs accounted for more than
80%.
Business
competitio
n
The SOEs were the workshops of
the big social factory: plans were
transmitted by leaders; goods and
materials were allocated; finance
revenues and expenditures were
unified; all goods are purchased
and marketed by state
The SOEs were almost in competitive fields and
the market mechanism in majority of fields was
playing the major role; many state-owned and
non-state-owned enterprises practiced the
method of cooperation and division of labor in
the upstream and downstream of the industry
chain; the expansion of invest was strongly
A comparison of the characteristics of SOEs In early period of reform & opening-up and at the present

19. 19
SOEs
Characteris
tics
In 1978 In 2012
Propriety
right
Ownership by
the whole people
Such patterns of propriety right as solely
state-owned, state-controlling and state-
owned capital joint coexisted
On the level of the parent company of the
national enterprises, except 6 enterprises that
were controlled by more than one state-
owned capital organizations, others were all
wholly state-owned enterprises. Among the
listed enterprises, the proportion of SOEs
was 38%; the proportion of market value was
about 51%.
soft budget
constraint
social
About 20% of the enterprises were registered
according to the Law on Enterprises and
practiced the system of general manager
continued to previous table

20. continued to previous point (3)
The Constitution of China has made clear the leading position of state-owned economy in national
economy. Besides, the 16th, 17th and 18th national congress of our party have stressed several times
that our country practices “the basic economic system of keeping public ownership as the mainstay of
the economy while allowing diverse forms of ownership to develop side by side”.According to the
basic economic system, the SOEs and state fund are in nature the tools for national economic
development.
The Fourth Plenary Session of the Fifteenth Central Committee of the Communist Party of China,
pointed out that state-owned enterprises take a dominant role in important industries and key areas
which are related to the lifelines of the national economy. They sustain and lead the development of
the economy, exerting a significant influence on the state macro-control goal. In facts, it shows the
leading function of state-owned enterprises.
20

21. Contents
21
1. A review on development strategies, policies and industrial policies in China
2. SOEs development stages and current status
3. Public policy functions carried out by SOEs can be observed practically
4. Why relay on SOEs rather than subsidise and regulate private enterprises?
5. Effectiveness, shortcomings, and impacts of SOEs carrying out public policy
functions
6. Other State-controlled entities playing role in development
7. Our conclusion: environment, principles, assessments, and conditions.

22.  In fact, in a transmission from China’s planned economy to the market economy, the intervention
of government is steadily decreasing. In the past, the government had an overall intervention in
term of enterprises’ production, sale, personnel, salary, distribution, etc. But now the
government intervention has gradually focused on public administration, formulation
development strategy and industrial policy.
 As this process was a long and gradual one, the intervention still exist, however, it could be
observed with features of growingly respect market rules and the legal environment, and market
mechanism played more and more important roles in resource and elements distribution.
 In China, there were no authoritative explanations on the government’s intervention in economy
and it’s relying on state-owned enterprises rather than other methods to achieve public policy
functions. But we can borrow the market failure theory and the research results of the OECD.
4.Why relay on SOEs rather than subsidise and regulate private enterprises?
22

23. (1)Why government intervene economic activities?
An Market Failure explanation on roles of SOEs : Using ownership control to remedy market
failures of
 Externalities
– airport, aviation, infrastructure, public transportation; public R&D platform
 Natural monopoly
– telecom, electric grid, etc.
 Public goods supplying, and public asymmetric information
– city utilities such as water supply, gas supply, road construction and maintains.
 Huge sunk costs
– large infrastructure, such as airport, subway system
 Inefficient market mechanism in a developing economy.
– General infrastructure; certain sector development or industry upgrading.
 Insufficient legislation, regulation or public governance in a transition economy.
– Food Safety; competiveness promotion; national industry growth up.
23

24. (2)Why government chose means of ownership rather than the industrial policy or
industrial regulation?
“Ownership control could be seen as a sort of economic tools implemented by the
government replacing others, such as industry policies, industry regulation, market
mechanism, and market regulation”
Ownership control, industry policy, market mechanism and industry regulations could be
complementation of each other.They could be used to solve certain failures in the ineffective market
and used to accelerate economy development especially in early stage of development.
When there is a lack of industry policy, market mechanism or industry regulations, ownership
control could be serve as a flexible implement;
The boundary of state-ownership or private ownership on a certain enterprises, theoretically lies in
the range and degree of market failure, and well the effectiveness of industry policy, market
mechanism and industry regulations.
Along with improvement of market mechanism, industry regulations and industry policy in China,
such as strengthening consistency of government intervention with market mechanism, the boundary
could be further moved to more privatization.
24

25. Contents
25
1. A review on development strategies, policies and industrial policies in China
2. SOEs development stages and current status
3. Public policy functions carried out by SOEs can be observed practically
4. Why relay on SOEs rather than subsidise and regulate private enterprises?
5. Effectiveness, shortcomings, and impacts of SOEs carrying out public policy
functions
6. Other State-controlled entities playing role in development
7. Our conclusion: environment, principles, assessments, and conditions.

26. 5. Effectiveness, shortcomings, and impacts of SOEs carrying out public policy
functions
26
(1) Effectiveness and shortcoming from the perspective of performance
The performance of state-owned enterprises has a huge influence on the increase of economy.
SOEs production in terms of GDP proportion in 2006
First Industry
Second Industry
and
Construction
Third
Industry
Whole Nation
Proportion in Industry
(%)
5.8 33.3 50.6 ——
Proportion in Whole
Nation (%)
0.68 16.31 19.92 36.9AGR of SOEs in manufacture Sector during 2005-2010
Total Industry Production Total profit NetAssets
All manufacture Sector (%) 22.7 29.1 19.5
All SOEs in manufacture
Sector(%)
17.3 17.7 14.1
SOEs in top 10 output
manufacture industries (%)
17.9 39.2 19.2

27. 27
26.36%
32.59%
16.08%
11.42%12.42%
16.97%15.53%
22.12%
26.08%
30.06%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
2006 2007 2008 2009 2010
国有及国有控股工业企业 私营工业企业
ROE
0.941
1.096
1.038
1.105
1.003
0.985
1.085
1.17
1.214
1.079
0.8
0.9
1
1.1
1.2
1.3
2006 2007 2008 2009 2010
国有及国有控股工业企业 私营工业企业
TFP
101.21
81.3180.24
68.67
54.83
44.67 64.41
54.48
47.47
41.73
34.11
28.24
0.00
20.00
40.00
60.00
80.00
100.00
120.00
2005 2006 2007 2008 2009 2010
国有及国有控股工业企业 私营工业企业
Gross industrial output value per capita
0.78
0.70
0.780.780.75
0.73
1.78
1.721.73
1.691.60
1.51
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
2005 2006 2007 2008 2009 2010
国有及国有控股工业企业 私营工业企业
Turnover of total assets
SOEs in Manufacture SOEs in Manufacture
SOEs in Manufacture SOEs in Manufacture
Private firms in Manufacture Private firms in Manufacture
Private firms in Manufacture Private firms in Manufacture
he ROE, TFP and the total assets ratio were clearly lower than that of the private sector. The gross industrial output value
per capita was the only one who is higher than private enterprise, which is mainly because of the increasing level of
intensification

28.  The activeness in economy of state-owned enterprise can be seen from the activeness of merger
and acquisition
28
No. of M&A by Large Companies in 2010
Buyer company No. of Companies No. of companies being
merged
No. of Companies being
merged per buyer company
Chinese 500 182 1112 6.1
SOEs in Chinese
500
134 903 6.7
Private Firms in
Chinese 500
48 209 4.3

29.  From the perspective of SOE reform, the effectiveness of the reform in the state-owned
enterprise is mainly becoming market participants, which participated in the market
competition actively. Some SOEs have gotten rid off the overall losses situation and
showed the flexibility activeness to the market competition.
 The reform of state-owned enterprises, especially the strategic reorganization after
1998, most mid and small sized SOEs privatized. Such privatization imposed two
effectiveness: one is giving room for the development of private enterprises; the other
is enhancing the techniques and managements of private enterprises.
 But in some fields, especially in natural monopoly, and administrative monopoly
sectors, sector reform and SOE reform lagged behind.Thus market mechanism had not
been effective and the efficiency of the company needs to be enhanced.
29
(2) Effectiveness and shortcoming from the perspective of SOE reform

30.  In the field of natural monopoly, such as power network and communications which are mainly
owned by the state and they have shouldered the responsibility of stability of the network and
system and universal service. But the problem of price, efficiency and the deepening of reform has
been the focus of various controversies.
 In the service field of public goods, some typical ones like postal service, urban road construction,
urban public transport, water supply, electricity supply, and heating supply and so on, state-owned
enterprises are taking charge. In those fields, state-owned enterprises have a good performance on
general and stable services. The main critics are about the enterprise’s inefficiency and the low-
quality of direct services.
 In typical externality fields, the government is pursing externality directly which enjoys merits
and demerits, such as airports, many cities had built the airport in advance which later contributed
to local economy development, but in some cities, those airports had been operated like unused
because of the lacking of the passengers.
 Under certain circumstances, state-owned enterprises have played a significant role as steady
supplying and general services: electricity generation; petroleum supply; “Every Village Projects”
carried by grid companies and by telecommunication companies.
 Because of the multiple aims of those monopoly enterprises and public products, and government
has not given enough subsidies for carrying out public functions, plus assessment indicators are
mostly scale and financial return, Thus, enterprises which are responsible for the public policy
functions also have a strong incentive for profits.
30
(3) Assessment on public policy functions carried out by SOEs

31.  Problems in sectors with strong entrance limitation:
 lacking reform impetus, because of lacking competitive stress and rich profits.And it is
possible that these companies trying to prevent those reforms that will eliminate interest of
the company.
 SOEs in those areas are mostly the wholly state-owned enterprises or the majority shareholder
enterprises, lacking pressure from private capital, thus could be easily result in administrative
intervention, the management personnel being administrated, and the inflexibility in
personnel appointing, dismissing, and salary mechanism.
 There are double need of industry system reform as well as SOE reform in those these
sectors. But because of its huge influence on national economy and the social operation,
reforms were usually lagged behind because of cautiousness.
 Along with improvement of market mechanism and legal system, if we are too obsessed with
public policy function carrying out by SOEs, the efforts of establishing effective industrial
regulation and market regulation might be squeezed out, and thus may prolonged the effective
conditions needed to deepen SOE reform.
31
(4) Impacts on ownership and governance by carrying out public policy function

32. Contents
32
1. A review on development strategies, policies and industrial policies in China
2. SOEs development stages and current status
3. Public policy functions carried out by SOEs can be observed practically
4. Why relay on SOEs rather than subsidise and regulate private enterprises?
5. Effectiveness, shortcomings, and impacts of SOEs carrying out public policy
functions
6. Other State-controlled entities playing role in development
7. Our conclusion: environment, principles, assessments, and conditions.

33. Development Banks:
Three policy banks were set up in China, namely, the China Development Bank, the Export Import
Bank of China,Agricultural Development Bank of China, and they are directly under the control of
state council.
The main purpose of the establishment of the National Development Bank is :
① to prepare the circulate necessary funds for key constructions in nation, in order to guarantee
the smooth progress of key construction which concerns the overall situation of national
economic and social development;
② to centralize the state investment funds which have been managed separately in the past, and
establish investment loan review system, which gives the investment credit decision-making
power to development banks, and requests it to undertake the corresponding responsibility and
risk, in order to prevent blind investment and redundant construction.
6. Other State-controlled entities playing roles in development
33

34. Economic Development Zone:
Economic Development Zone generally includes several types, such as Economic andTechnological
Development Zone, high-tech industrial park, high tech Development Zone, and all kinds of
industrial parks (such as agriculture development zone, chemical industrial park, automobile
industrial park, etc.).According to the scale of development zone, it can be divided into national
development zones, development zones at the provincial level, municipal development zones and so
on. Up to May 2011, the number of national economic andTechnological Development Zone
reached 128.
The purpose of establishing economic development zone is different, some of them are for
promoting scientific research and developing high technology industry, some of them are for
attracting foreign investment and expanding export. Development zone are generally in accordance
with relevant national industrial policy on foreign investment, and cut taxes on the encouraged
projects invested directly from foreign enterprises (such as policy on corporate income taxation that
the exemption will be in first two years, and reduction half for next three years), preferential land
and other preferential policies to attract industry, various funds and real investment to develop
factory, office. Some places promote the local economic development by opening development zone,
such as the Shenzhen Special Economic Zone, Shanghai Pudong NewArea, Suzhou Industrial Park,
Tianjin Development Zone, etc.
34

35. Contents
35
1. A review on development strategies, policies and industrial policies in China
2. SOEs development stages and current status
3. Public policy functions carried out by SOEs can be observed practically
4. Why relay on SOEs rather than subsidise and regulate private enterprises?
5. Effectiveness, shortcomings, and impacts of SOEs carrying out public policy
functions
6. Other State-controlled entities playing role in development
7. Our conclusion: environment, principles, assessments, and conditions.

36. (1) It should be a stage regularity of government’s intensive intervene in economic
activities; SOEs operations in many jurisdictions are becoming increasingly market-
oriented.
(2)It is better to assign the public policy functions to SOEs, based on the market failure
rather than random wishes
(3)There is a need to assess the cost and return, between the way of using ownership
control and the way of implement industry policies & regulation, before making strategic
decision on country’s development strategy and development policy, there should be a way
suitable for one certain country.
(4)There are conditions for using SOEs and other state-controlled entities, and a more
appropriate development policy should be considered when conditions changed.
7. Our conclusion: environment, principles, assessments, and conditions
36

37. 37
 Condition for Development stage:
 Relatively lagged behind development level, or weak economy——strong incentive for development
 Shortage of finance, shortage of skills
 Imperfect market mechanism
 Strong needs to overcome shortage of public goods providing, weak investment in externality
industries, and weak industry regulation.
 Conditions for government：
 Strong Catch-up goals set by government
 Rather large sum of resources (including nature resources) controlled by government yet under being
exploited
 Weak government capability in term of legislation, regulation and market mechanism building, but
perhaps strong in administration power in some countries.
 Conditions for SOEs:
 Strong ownership peering from government department rather that weak or dispersed ownership
rights.
 Efficient corporate Governance mechanism
 Profit or value oriented for most SOEs in general industries sector, clear separation between
commercial and non commercial objectives in one SOEs in term of accounting, operation objectives
and clear accountability.
 Hard budget constraint and market competition pressures, competition neutrality important

38. Thanks a Lot forYour Attention!
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