This article, written by Jiang Xiaojuan, deputy head of the Financial and Trade Research Institute under the Chinese Academy of Social Sciences, on what he has gained from the study of the Decision of the Fourth Plenary Session, runs in part as follows:

The Fourth Plenary Session of the 15th Central Committee of the Communist Party of China (CPC) pointed out that State-owned enterprises (SOEs) must advance in the van in technological progress and industrial upgrading, actively expand new space for development and play a key role. I would like to say something about what I have learned from the study in regard to this question.

The Importance and Urgency of the Structural Optimization and Industrial Upgrading of the State-Owned Economy

Objective requirement for the entry of economic development into a new stage. On the present basis of structure and efficiency, the overwhelming majority of China's trades are in a state in which the supply exceeds the demand. New development space has to be achieved through increasing the variety and improving the quality of products and lowering production cost; and by producing new products comprising high added value and high technological content and meeting market demands. In short, only by comprehensively accelerating structural optimization and industrial upgrading, is it possible to get rid of the demand restriction imposed by the relatively low technological and industrial level, and to open up new demand space at a higher structural level.

Fundamental measures to enhance international competitiveness. First is the need to cultivate new export-oriented industries. In the future, the competitiveness of China's labor-intensive low- and medium-grade products on the international market will be gradually weakened, so it is necessary to expedite the growth of a batch of industries which contain a high level of technology and added value and can give play to China's abundant labor advantage. Second is the need of the internationalization of competition on the domestic market. Along with the mounting investment made by transnational corporations in China, Chinese enterprises, including State-owned ones, have to face competition at the international level even though they are on the domestic market. Third is the need to strive for an advantageous position in the pattern of global division of labor. In the pattern of global division of work, anyone who possesses key technology and control the production capacity of key products and component and spare parts occupies an initiative and advantageous position on the basis of technological monopoly. Since the launch of the reform and opening program, a group of SOEs have come to the fore through fierce market competition and have become superior firms with relatively strong competitiveness on both domestic and international markets. Currently they are China's main forces participating in international competition.

The important content of realization of the strategy for sustainable development. On the whole, China is a country with relatively shortages of resources, however, due to the fact that China has been engaged in extensive management over a long period of time, the consumption of resources for a per-unit output is obviously higher than the level of developed countries, and the problem of serious environmental pollution has resulted. In the future, China must follow the road of intensive growth for its economic development, it has to accelerate the technical renovation of existing industries, develop newly emerging industries causing low consumption of energy and other resources, having high added value of products and being conducive to environmental protection, raise the output level of per-unit resource input, and reduce and eliminate various sources of pollution.

The basic guarantee for State security and China's international status. The level of a country's industrial and technological development constitutes an important guarantee for its economic security. The Asian financial crisis erupted since 1997 has brought us profound enlightenment: when the economy develops to a certain level, the low-cost labor superiority begins to decline, the country's financial system and the security of its national economy will face serious threat if it fails to enhance its own technological development capacity, its product competitiveness and its enterprises' profit-making capability and, instead, one-sidedly pursues high speed, large scale and market occupancy. Industrial and technological strength is also the basic guarantee for State sovereignty being free from encroachment and for China's international status.

The Orientation and Focus for the Structural Optimization and Industrial Upgrading of State-Owned Economy

Transforming traditional industries with advanced technology. Transformation of traditional industries will still be the important content of China's structural optimization and industrial upgrading, even in developed countries, traditional industries have not been eliminated, even their important status has not been shaken to the foundation. For example, among the globe's top 500 industrial enterprises, automobile, iron and steel, petroleum, chemical, food-processing, machinery and other traditional industrial enterprises continue to occupy the leading position. We must have a sober understanding of this, only then can we have a full understanding of the importance of the technical renovation of traditional industries and push forward this renovation in real earnest. However, compared with developed countries, China still lags far behind in terms of the product quality and technological grade of its traditional industries. Expediting technical renovation is an important content of the structural optimization and industrial upgrading of the State-owned economy. Transformation of traditional industries has also provided a vast market for the development of high and new technological industries.

Occupying an important position in high and new technological industries. The development of newly emerging industries and high technological industries, such as information, bio-engineering, new material, aeronautical and aerospace, and environmental production industries, has exerted profound influence in economic, social, military and political areas. Competition in comprehensive national strength relies increasingly on the competition of science and technology. We must occupy technological commanding height and possess independent technological development capability in trades and spheres which represent the development orientation of key technology, have broad market prospects and major strategic significance.

Correctly Handling Three Relationships

Properly handling the relations between the advanced nature and usability of technology. In the technological renovation and high and new technological industrial development, it is necessary to correctly handle the relations between the leading level of technology and China's industrial, technological and demand level.

Properly handling the relations between reform and development. In the process of the structural optimization and industrial upgrading of the State-owned economy, attention should be paid to avoiding such a tendency, that is the attempt to replace the reform of SOEs with structural optimization and industrial upgrading and evade and bypass difficulties in reform. Only by realizing the transformation of the operational mechanism and establishment of a new system in line with the requirements of the market economy, and enabling enterprises to really become a legal entity and market mainstay characterized by independent management and assumption of sole responsibility for their own profits and losses, is it possible for enterprises to have the internal incentive for long-term, unremitting structural optimization and industrial upgrading, and the structural optimization and industrial upgrading of the State-owned economy can proceed smoothly only by further removing barriers between different departments and regions and lifting inappropriate restrictions on the regrouping of the property rights of State-owned assets and promoting the rational flow of resources in accordance with the market principle on the premise of guaranteeing the preservation and increment of the value of State-owned assets. Therefore, accelerating enterprise reform and improving supporting measures are the internal requirement for effectively implementing the strategy for the structural optimization and industrial upgrading of the State-owned economy.

Properly handling the relations between market orientation and government guidance. The Fourth Plenary Session pointed out that enterprises are the mainstay for technical innovation and industrial upgrading, this definition is very important. As the mainstays, enterprises enjoy the share of benefits from technological progress and industrial upgrading, they also take the risk of failure, forming a balancing relationship between incentive and restraint. However, when involving major technological renovation projects and developing high and new technological industries, it is not enough to completely follow market guidance and to undertake responsibility and risk completely by the enterprise. Currently, global competition in the field of high and new technological industries is not completely market-oriented, the competitive position of a country is, to a certain extent, the result of the role jointly played by the government and the market. Therefore, government supporting policy is still necessary for a small number of important, strategic products and technologies, because this is the only way to enable enterprises to come up from behind and to occupy a niche in the world.