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Chinese State-Owned Enterprises Under Stricter Scrutiny over Efficiency
State-owned enterprises (SOEs) are spurred to improve efficiency as the Chinese government adopted a new SOE evaluation system based on returns on government investment this year.
Relevant authorities will use the results of such evaluations as the basis for appraising the performance of and meting out encouragement or punishment to the SOEs.
Ministry of Finance said in a news release Wednesday that the new evaluation system has overcome the defects of the old system that put weight on output, profit and tax payment.
The new evaluation system uses the rate of return on investment as the key indicator of the performance of the SOEs.
The evaluation system has a set of multi-tier criteria for SOEs of various sizes and industries. Through experiments over the past two years, the new system has proved to be able to accurately reflect the economic efficiency of SOEs and the performance of their leaders in any specific financial year.
The standards of the evaluation will be updated and promulgated by the Ministry of Finance every year. The ministry said that the government will develop a mechanism to publicize the result of SOE evaluations over time so as to enhance supervision by the general public and mass media.
According to a joint notice the ministry and other government departments released recently, the new evaluation system is applicable to all SOEs that have been listed as key enterprises subject to supervision of government at various levels, enterprises under state-owned group companies and other SOEs picked by local governments.
The new evaluation system will not only assess the financial and capital soundness of SOEs, but also appraise the performance of SOE executives. The Ministry of Finance said that the evaluation system will be linked to the adoption of annual salary and right choices for senior executives on a experimental basis.
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