Debate heats up on role of govt giants

Wu, 56, says it is possible the remaining 45 percent of the Harbin government's investment in the company may be reduced over time.

"You can see that with our two quoted subsidiaries all the capital has been listed, so maybe in the future the State investment in the group will be gradually reduced," he says.

Gao Xiaohua, board secretary of Harbin Modern Group, believes some element of privatization would benefit smaller SOEs like hers.

Her company is best know for running events like the 80-day Harbin Ice and Snow World and the Harbin International Beer Festival, which takes place this month. It also makes the well-known Modern ice cream and owns the Modern Hotel, the landmark local hotel built in 1906.

"There is a need for reform. The current system is not perfect for a group like us to develop. Sometimes we want to implement big projects but we are short of funds."

Gao, who joined the company as a graduate in 1996, says the SOE model of ownership only tends to benefit the companies in key strategic sectors.

"We really don't get the government support like the SOEs in the utility or power generation sectors. We would actually like to form partnerships with international companies that might invest in us. That would improve our brand recognition."

Carr at NSBO argues that the dominance of the larger SOEs not only affects the smaller ones but the private sector in general in China.

"Being part of the government, they get all kinds of preferential treatment. The other advantage is that they get cheap capital, and this makes it very difficult for private companies to compete because they can't match the returns on capital when their costs are so much higher."

Martyn Davies, chief executive of Frontier Advisory, a research and strategic advisory firm based in Johannesburg, believes the Chinese economy will stall without major reform of its SOEs.

"They have done their job driving growth for the past three decades but now it is time to move on. Every Chinese SOE friend I speak to knows this. They also tell me it is going to change quicker than people think."

Kerry Brown, executive director of the China Studies Center at the University of Sydney, says the slowdown in the Chinese economy makes SOE reform even more vital since new growth will only come through driving efficiency.

"China now needs to deliver growth through efficiency. No one pretends SOE reform is going to be straightforward but it is extremely necessary in the battle to produce the efficiency the economy now needs.

"I don't think that the central government can put off reforms. The issue is how quickly, and how far they go."

Qiu, 45, of Harbin Electric Machinery, looks the very epitome of a modern industrial boss, wearing the company's blue uniform.

He says he is aware that China's SOEs still need to bridge a gap between them and the major foreign multinationals.

His company has sent 60 employees to train with General Electric Co in the US and Hitachi Corp in Japan as well as being involved in collaborative ventures.

"Many of the major multinationals have been operating for more than 100 years, and we have a lot to learn from their techniques, their marketing and their project executions. It is our dream to be as famous as them in the world."