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SOE Reform Blazes Trail for Successful Enterprise Operation
"The 20-odd-year reform of Chinese State-owned enterprises (SOEs) has fully proved that as long as modern enterprises with "distinct property rights, clearly-defined rights and responsibilities, the separation of government functions from enterprise management and scientific management" as the main content can be set up, it is entirely possible to run SOEs well". Wei Jiafu, president of the China Ocean-Shipping (Group) Company, made the remark on May 29 on the platform of Harvard University, giving US specialists and scholars a lesson on the reform of Chinese State-owned enterprises.
Along with China's impending entry into the World Trade Organization (WTO), experts in US economic and trade circles and the enterprise management research field are showing increasing interest in the reform of Chinese SOEs. President Wei Jiafu was invited to visit Harvard University for one day during which he gave two lectures on the reform of Chinese State-owned enterprises respectively in the commercial institute and John King Fairbank East Asia Research Center. Taking the reform of the China Ocean-Shipping Group in recent years as an example in his lectures, he dwelled mainly on the course and basic experiences China gained in the reform of State-owned enterprises, and made positive analyses.
We Jiafu said the China Ocean-Shipping Group has, since 1998, continually expedited reform, with remarkable results. At present, the China Ocean-Shipping Group has formed a diversified business pattern based mainly on shipping and complemented by related shipping services and terrestrial industries, thus becoming a trans-industry, trans-ownership, trans-regional and trans-national large State-owned enterprise. The group has a staff of more than 80,000 people and assets worth over US$15 billion. The group possesses and operates more than 500 modern merchant ships, placing itself in the front ranks of the world in terms of scale. The China Ocean-Shipping Group has become an epitome of success in the reform of Chinese State-owned enterprises.
After the conclusion of the lectures, participating experts and scholars raised many questions. Wei answered the questions one by one in fluent English, a very lively atmosphere prevailed over the meeting-place.
Some audiences asked about the operational method of the group. Wei said that after the structural reform, the China Ocean-Shipping Group Company established a system of "State ownership and market-oriented operation", i.e., "State-owned, city-operated" system and mechanism. The characteristics of the group are State ownership with exclusive investment, therefore, no board of directors was established, it is operated under the direct leadership and authorization of the central government (representative of the owner). The enterprise's operation is managed through the establishment of a level of managers and a board of supervisors. As long as responsibilities, rights and interests of various parties are clearly defined, such a legal-person management structure can also enjoy coordinated operation and effective control.
Some audiences also asked: If leadership at the upper level asks the ocean-shipping group to assign a certain project to a factory of a certain place to accomplish the task, what decision will the China Ocean-Shipping Group make? Wei answered: through reform, particularly the reform of the property-right arrangement system, the China Ocean-Shipping Group Company is no longer a State-owned enterprise under the previous planned economy method. What the group considers is the interests of the shareholders, to put it plainly, it is to see whether or not it is possible to make money and this is not much different from US enterprises. "If the enterprise I manage had made no profits, and the China Ocean-Shipping Group Company couldn't have undergone so rapid development in recent years, the central government wouldn't have allowed me to continue on with my work", said President Wei Jiafu, adding by way of example that usually the contractor for an important project is chosen through invitation of bidding. Sometimes foreign enterprises can also participate in competitive bidding. Not long ago, the China Ocean-Shipping Group Company had a large project that drew shipyards of Japan, the Republic of Korea and some other countries into participating in competitive bidding.
Again some audiences expressed the hope of being able to understand the reward and option system for the group's staff members. Wei said that his group has a variety of rewarding methods, for example, a high-level manager with remarkable achievements can get a fairly rich material award. In addition, the group also carries out diversified reform of stock rights in its affiliated enterprises, introduces an "annual salary system" for the managers of its affiliated enterprises, and attempts to institute a "manager share-holding" system.
Wei Jiafu then answered questions concerning how Chinese State-owned enterprises should cope with the challenges raised after China's WTO accession, and Chinese enterprises' management culture and their support for charities. A US expert said to the reporters after the meeting, "After hearing Mr. Wei's lecture, I felt our understanding of China's State-owned enterprises is really too little. Perhaps it is impossible to explain the reform of China's State-owned enterprises by using American scholars' traditional concepts about State-owned enterprises and private ones, but the example of the China Ocean-Shipping Group Company indicates that the Chinese have blazed a trail belonging to themselves."
This report was written by Ting Gang, our staff reporter stationed in the United Nations, recording the lectures given by the President of the China Ocean-Shipping Group Company in Harvard University. It is carried on Page 7 of People's Daily June 4.
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