Interview: China Needs Smooth SOE Reform

The smooth reform without causing any major social disturbances will be the biggest challenge for China's state-owned enterprises (SOE) after its accession into WTO, a senior OECD official said Thursday.

"We should not expect too ambitious paces in the process of China's SOE reform because it is a big country like a big oil- tanker and it takes some time to make a turn," Seiichi Kondo, deputy secretary-general of the Organization for Economic Co- operation and Development (OECD), told Xinhua when attending the second Asian roundtable on corporate governance in Hong Kong from May 31 to June 2.

Kondo believed that the strong Chinese leadership will surely promote a smooth transition of the country's state-owned enterprises. This will help China's economy integrate with the world economy, he stressed.

The Chinese leadership is determined to make a "turn" and has taken some necessary steps to do so," Kondo said. He said that he was optimistic about the success of the reform.

Although the injection of the public funds into China's economy is very successful, it is important to establish a good tax system to maintain the high level of growth, because a sound tax system contributes greatly to the SOEs' reform, he said.

The state-owned enterprises also have to have appropriate corporate governance because the issue of a market economy, after all, is how to get access to low-cost capital internationally, the OECD deputy secretary-general noted, adding that that will automatically pose impact on the economic reforms.

To ensure the successful reforms of SOE, Kondo said that it is also quite important to build up a sound social security system, since the globalization forces these enterprises into sever competition and the society and the government have to take care of the losers and encourage them to go back in the competition. The theme of the OECD's Asian Roundtable, which was attended by over 120 delegates from many economies in Asia as well as international and regional bodies such as the OECD, the World Bank and the Asian Development Bank, is the role of disclosure in strengthening corporate governance and accountability.



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