-- A survey report from SOE managers in 2000

Research Report No 53, 2001

The Chinese Entrepreneurs Survey System under the Personnel Centre of the Development Research Centre of the State Council and the Research Department of China Enterprises Federation jointly organized and implemented the "2000: A survey by questionnaires among 1,000 SOE managers". A total of 4,000 questionnaires were distributed at the end of 2000 and 1,075 effective copies were collected. The samples of the survey were all the state-owned and state-held enterprises (SOEs) based in 31 provinces, autonomous regions and municipalities except Hong Kong, Macao and Taiwan. The large, medium-sized and small enterprises respectively accounted for 48.5%, 46% and 5.5%.

The survey shows that most of the managers agree that the administrative reform and relationship adjustment between the government and enterprises have achieved initial results; gratifying change is seen in the relations between ownership and management of enterprises, the position of the state as an investor has gradually been clarified, and the simultaneous assessment of managers and state assets has changed drastically; the number of enterprises transformed in structure has increased, but there is a long way to go before a substantial progress can be made; the enterprises’ stock right has been more diversified; and the corporate governance structure has been somewhat improved. After nearly three years’ effort, the management of SOEs has been raised to a new level. Most of them have gradually improved their internal management system. The labor employment system that meets the need of market competition has taken initial shape. They have started to use electronic and information technologies to intensify management and have therefore much upgraded technological level, but compared with the developed countries, there still exists a wide gap - the investment in R&D is not sufficient, and technological development and equipment level as well as the renovation capability need improving. The SOE managers believe that annual salary and stock right are good incentive means; the state laws and regulations exercise effective power over the enterprise managers, but the appointment of them and their deputies are mainly made by superior departments; lack of incentive mechanism and administrative interference are the main factors that prevent the managers from playing their role. In the course of the survey, the managers have put forward quite a few suggestions for the government to improve macro economic environment: the government should create a more lenient climate for SOEs, step up efforts to curb "arbitrary fines, charges and levies", further reduce the tax burden on enterprises, continue to severely crack down on smuggling and improve market order through stricter law enforcement in order to create a good competition environment and order.

I. Evaluation of the Reform

(1) The administrative reform has achieved initial results.

Since the state started the administrative reform in 1998, the central government has basically completed the reform of its ministries. The local administrative reform is still going on. How did the managers evaluate the current government reform? When asked "how would you evaluate the current administrative reform and adjustment of government-enterprise relationship", 1% of the managers responded "very satisfied"; 20% of them said "fairly satisfied"; 48.6% "so-so"; 24.7% "not quite satisfied"; and 5.6% " very much unsatisfied." This indicates that a majority of managers believed that the administrative reform and adjustment of government-enterprise relationship has gained initial results.

(2) The enterprises’ decision-making power has been basically guaranteed.

Giving enterprises decision-making power was the measure the state took to reform SOEs. With the improvement of a market economy, this is of greater importance to enterprises. The survey shows that responding to the question of "guaranteeing enterprises’ decision-making power", 45% of the surveyed said "fairly good"; 48.3% "so-so"; and 6.7% "fairly bad". The survey indicates that the 14 items of decision-making power that the state declared to give enterprises in 1992 were basically realized eight years later. Of course, more efforts are needed so that such power is completely granted to the enterprises.

II. Evaluation on the Relations between Ownership and Management of Enterprises and Establishment of a Modern Corporate System

(1) Gratifying change is seen in the relations between ownership and management of enterprises.

1. The position of the state as investor has started to be clarified. When asked "In what aspects has the relations between ownership and management of your enterprise been streamlined?", 43.1% of the surveyed answered "the position of the state as investor has been clarified"; 31% agreed that "the various self-decision rights of legal entities have been basically guaranteed"; 30.8% said "enterprises’ corporate governance structure is complete"; 29.7% shared that "the representative or organ of state ownership is clear"; 15.2% of the surveyed believed that "enterprise corporate governance structure is really functioning"; and 25.2% replied "the relations has not been streamlined yet".

On the question "whether somebody or organ is exercising the right of state shareholders on behalf of the state", 72.7% of the managers replied "yes" and 27.3%, "no".

2. The simultaneous assessment of managers and state assets has improved. For years, the state-owned enterprises in fact have not any owner. The departments to assess the managers and state assets are usually different. This survey indicates that the situation is turning for the better. On answering the question "whether the department or organ to assess your managers are also responsible to assess the maintenance and increase of state asset value?", 80% of the managers said "yes" and only 20% "no".

3. The diversification of stock right has made headway. One successful way to implement corporate transformation is to realize diversification of stock right. This is not only beneficial to improving enterprises ownership-management relations, but also helpful to establishing a standardized corporate governance structure. At present, this process has seen initial progress. According to the survey, 49.7% of the managers believe that their companies have realized stock right diversification.

(2) The restructuring of enterprises still has a long way to go.

To build a modern corporate system in most of the large and medium-sized enterprises is one of the two major objectives in three years. How is the restructuring going on after three years? The survey indicates that 32.4% of the managers replied "have already restructured"; 28.6% "not restructured yet"; and 39% "being restructured".

What does the restructuring mean to the enterprises that have already been restructured? The survey shows that 24.6% of the answers were "the companies’ internal management system has been improved"; 20.3% of the replies were "the ownership-management relations are clarified"; 20.1% of the respondents said "a scientific and standardized corporate governance structure has been set up"; 12.8%, "decision-making has been more scientific"; 12.6%, "the decision-making power has been expanded"; and 11.4%, "the enterprises’ performance has obviously turned for the better".

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