INCREASE THE STRENGTH AND SCALE OF STATE-OWNED ENTERPRISES

INCREASE THE STRENGTH AND SCALE OF STATE-OWNED ENTERPRISES*

October 10, 2016

When discussing the issue of strengthening the Party in state-owned enterprises (SOEs), we must first understand whether we still need SOEs or not. I raise this question not without reason, nor to create unnecessary alarm, but because it is a very real issue that we must confront. 

There is no doubt that SOEs and the state-owned sector of the economy must continue to develop and grow in strength under the CPC leadership and in our socialist system. However, there are individuals who have presented entirely misleading arguments targeting SOEs. They harp on about the “monopoly of SOEs”, spread the idea of “SOEs competing against private enterprises for profit”, and claim that SOEs are “intolerable entities”. They advocate privatization, divesture of state ownership, and stripping the state-owned sector of its leading role. They claim that the state-owned public sector develops at the expense of the private sector and vice versa. Hostile forces and individuals with ulterior motives single out SOEs for malicious attacks, claiming that “if SOEs are not eliminated, China will not prosper” and asserting that “dismantling” is the best way to reform SOEs. We must stay alert to their hidden agenda. Well aware of the significance of SOEs to our Party’s governance and our socialist system, these people aim to confuse the public and undermine the foundations of our governance and social system. Unfortunately, some of our officials fail to see and understand this issue clearly. They have accepted some vague and seemingly plausible but erroneous ideas. We must analyze the issue from a political perspective and not consider it merely as a simple issue of ownership or purely an economic one. That would be too naive.

I have said before that SOEs are part of the material and political foundations of socialism with Chinese characteristics. They are crucial for consolidating the leading role of the public sector, maintaining the governing status and capacity of the Party, and upholding our socialist system. 

As the material foundations for Chinese socialism, SOEs have secured tremendous achievements since the founding of the PRC in 1949, particularly after the launch of reform and opening up in the late 1970s. In 2015, there were 167,000 SOEs nationwide, with total assets of RMB140.7 trillion, operating revenue of RMB44.9 trillion, and total profits of RMB2.5 trillion. China has 110 enterprises listed in the Fortune Global 500, ranking second in the world, and 83 of them are state-owned. SOEs have made significant and world-leading technological innovations and mastered a large number of core technologies in key fields such as manned spaceflight, lunar exploration, deep sea exploration, high-speed rail, ultra-high-voltage power transmission and transformation, and mobile communications. They have shouldered numerous social responsibilities, including investing in infrastructure and public services which require large financial input but have low returns, undertaking long-term and high-risk fundamental research and development, implementing major projects in defense-related science, technology and industry, providing relief and response after major natural disasters and emergencies, and implementing projects related to poverty reduction and public wellbeing.

Through deeper reform, optimization and adjustment, and innovative development, SOEs have built up their presence in important industries, critical sectors, and key areas of infrastructure that are related to national security, the lifeblood of the national economy, and the wellbeing of the people. They have also gravitated towards prospective and strategic industries and become leading enterprises with core competitiveness. As a result, there has been a steady increase in the quantity and quality of state-owned assets and a gradual improvement in the distribution and structure of state-owned capital. Moreover, the vitality, leveraging power, influence, international competitiveness, and resilience of the state-owned sector continue to strengthen.

Therefore, I would like to state very clearly that SOEs have made a historic contribution to China’s economic and social development, technological progress, national defense, and public wellbeing. This is a feat that cannot be denied. If it were not for the important material foundation laid by SOEs over the years, we would not have achieved economic independence, national security, and a steady improvement in people’s lives. Neither would China enjoy its current international standing as a steadfast socialist country in the East.

From a political perspective, for our Party to “sit tight on the fishing boat despite the rising wind and surging waves”, we must have a backbone that will follow the Party’s command, respond promptly and readily to challenges at critical moments, and prevail. SOEs and their Party members, officials and employees are exactly such a force. We can count on them at critical moments.

SOEs are an important pillar supporting the Party in the governance and rejuvenation of China. The working class is China’s leading class; it is the most steadfast and reliable class foundation of our Party’s governance; and it is the main force for realizing a moderately prosperous society in all respects and for upholding and building socialism with Chinese characteristics. SOEs have trained a large contingent of industrial workers, with over 40 million employees, nearly 800,000 Party organizations, and over 10 million Party members. They constitute the backbone of the working class in China. Strengthening SOEs and harnessing the role of the working class is significant for bolstering our Party’s governing status and our socialist system. This is the basis for my statement that SOEs serve as the political foundation of socialism with Chinese characteristics.

If SOEs shrivel, collapse or disappear altogether, how can we uphold the leading role of public ownership, the state-owned sector of the economy, and the working class? How can we achieve common prosperity? How can we consolidate the foundations of our Party as a ruling party? How can we uphold and develop socialism with Chinese characteristics? We must remain sober-minded about these questions, and so must leading officials at all levels, especially senior officials, as well as Party members and employees of SOEs. We cannot simply parrot what certain people are preaching, and play into their hands.

SOEs shoulder a significant historic mission in upholding and developing socialism with Chinese characteristics, implementing the Five-sphere Integrated Plan and the Four-pronged Comprehensive Strategy, achieving the Two Centenary Goals, and realizing the Chinese Dream of national rejuvenation. Firm support for the development of SOEs and the non-public sector is a manifestation of confidence in our socialist path, theory, system and culture, and of our political commitment.

Therefore, SOEs must be strengthened. All local authorities, government departments, and SOEs must act on the decisions and plans of the CPC Central Committee regarding their reform and development. They must adapt to changes in the domestic and international economic situation, continue to preserve and increase the value of state-owned assets, improve the competitiveness of the state-owned sector, and bolster the role of state capital. At the same time they should expand reform of SOEs, improve their operational and managerial capabilities, strengthen supervision of their assets, and increase their strength and scale.

* Part of the speech at the National Conference on Strengthening the Party in SOEs.

(Not to be republished for any commercial or other purposes.)