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| Decision on the reform and development of state-owned enterperises |
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THE DECISION OF THE CENTRAL COMMITTEE OF THE COMMUNIST PARTY OF CHINA ON MAJOR ISSUES CONCERNING THE REFORM AND DEVELOPMENT OF STATE-OWNED ENTERPRISES(Adopted at the Fourth Plenum of the 15th CPC Central Committee on September 22, 1999) (Effective Date：1999.09.22--Ineffective Date：) I. ADVANCING SOE REFORM AND DEVELOPMENT IS AN IMPORTANT AND URGENT TASK II. MAJOR OBJECTIVES AND GUIDING PRINCIPLES OF SOE REFORM AND DEVELOPMENT III. STRATEGIC READJUSTMENT OF THE LAY-OUT OF STATE ECONOMY IV. PUSHING FORWARD STRATEGIC RESTRUCTURE OF SOEs V. ESTABLISHING AND IMPROVING THE MODERN ENTERPRISE SYSTEM VI. STRENGTHENING AND IMPROVING MANAGEMENT OF ENTERPRISES VII. IMPROVING BALANCE OF SOE DEBTS AND ASSETS AND REDUCING SOE SOCIAL BURDENS VIII. DOING A GOOD JOB OF WORKFORCE REDUCTION, RE-EMPLOYMENT AND SOCIAL SECURITY IX. SPEEDING UP TECHNOLOGICAL PROGRESS AND INDUSTRIAL UPGRADING OF SOEs X. CREATING SOUND EXTERNAL ENVIRONMENT FOR SOE REFORM AND DEVELOPMENT XI. STRIVING TO BUILD A TEAM OF HIGHLY QUALIFIED BUSINESS MANAGERS XII. STRENGTHENING THE PARTY'S LEADERSHIP IN THE REFORM AND DEVELOPMENT OF SOEs To achieve the magnificent goal of the trans-century development of the country's reform, opening-up and modernization drive, the 4th Plenum of the 15th CPC Central Committee discussed the major issues related to the reform and development of State-owned enterprises (SOEs) and made the following decision. I. ADVANCING SOE REFORM AND DEVELOPMENT IS AN IMPORTANT AND URGENT TASK Since New China was founded 50 years ago, the Chinese people of all nationalities have, under the leadership of the CPC and through unremitting efforts, scored great achievements in socialist construction. China has developed from a poor and backward agrarian country into a socialist country that will soon reach a moderate level of prosperity and is striding toward the goal of industrialization and modernization. This is a great historical leap forward in the developing process of the Chinese nation, and in which the SOEs and the working class have made great and indelible contributions. Since the Third Plenum of the 11th CPC Central Committee, the Party has opened up a new way of building socialism with Chinese characteristics, guided by Deng Xiaoping Theory. To overcome the defects of the traditional planned economy, we have consistently emancipated our minds, sought truth from facts, advanced gradually in due order, and constantly deepened the reforms of SOEs and the whole economic system to push forward the modernization drive. Profound changes have taken place in the SOEs' management system and operational mechanism, and a large number of enterprises have grown strong amid market competition, with their technology and equipment remarkably upgarded. The output of some important products mainly manufactured by SOEs has taken the lead in the world. Under the new situation in which public ownership serves as the main form of ownership and other forms of ownership develop simultaneously, the State-owned economy, with its overall strength further enhanced, continues to play a leading role in the national economy and has always been the main source of financial revenue, providing strong support for the country's reform and construction. After years of effort, SOEs have taken an unprecedented major step toward the reform's goal of building a socialist market economic system. SOEs reforms are extensive and profound. The transformation of the SOEs' system and their structural readjustments have reached a crucial stage, with some deep-rooted contradictions and problems having emerged. A considerable number of SOEs have not yet adapted to the demands of a market economy due to the long-term influence of the traditional system, the many problems left over from history, the redundant construction over the past years and the drastic changes of market environment. They are not flexible in terms of operations, weak in technical innovation, heavily in debt and social burdens, and have too many surplus workers and difficulties in production and business operations. Their economic returns are dropping and some of their employees have difficulties in their life. It is imperative to take practical and effective measures to solve these problems, which has a vital bearing not only on the success or failure of SOE reform, but also on the success or failure of the overall economic restructuring. The whole Party must fully see the importance and urgency of pushing forward SOE reform and development, and must have a sober understanding of the long and protracted nature of this work, and work tirelessly to make new breakthroughs. At the turn of the century, peace and development are still the themes of the times, but hegemony and power politics have also appeared in a new form. Comprehensive national strength has become an increasingly leading factor to determine the future and fate of a country. To enhance China's economic strength, defense capability and national cohesive force, we must constantly promote the development and growth of the State-owned economy. The public-ownership economy, which includes the State-owned economy, is the economic base of China's socialist system. It is a basic force the State uses to lead, advance and regulate economic and social development, and an important guarantee for realizing the fundamental interests and common prosperity of the people. We must firmly implement the guidelines of the 15th CPC National Congress, push forward SOE reforms and development, and enhance the vitality of the SOEs and the control of the State-owned economy in an overall way, and this is of great significance to the establishment of a socialist market economic structure, to the Promotion of the sustained, fast and healthy development of the economy, to the improvement of the people's living standards, to maintaining a good political situation of stability and unity, and to consolidating the socialist system. The SOEs are a pillar of China's national economy. China must always rely on and bring into full play the important role of the SOEs to develop the productive forces of the socialist society and realize the country's industrialization and modernization. Under the situation in which economic globalization and the scientific and technological progress are accelerated, SOEs are facing increasingly fierce market competition. Development is of overwhelming importance. Therefore it is vital to keenly grasp the development trend of the domestic and world economy, take concrete measures to change the mode of economic growth, and expand the space for development to create new advantages for SOEs as soon as possible. The SOE reform constitutes the central link of the entire economic restructuring. In establishing and improving a socialist market economic structure and effecting a good combination of public ownership and market economy, the most important thing is to enable the SOEs to form a management system and an operational mechanism that suit the demands of the market economy. It is imperative to continue to emancipate minds and seek truth from facts for the sake of developing the productive forces of the socialist society, enhancing the comprehensive national strength of the socialist country, and improving people's living standards. We should boldly make use of every operational method and organizational form that reflect the law of modern socialized production, and strive to explore various forms of public ownership that will greatly promote the development of productive forces and make new headway in deepening the SOE reform. To succeed with SOE reform and development is the important basis for the country to realize lasting peace and order and maintain social stability. It is imperative to correctly handle the relationship between reform, development and stability, and the intensity and pace of reform should conform with national strength and social bearing capacity, and strive to create a new situation in which reform, development and stability will promote each other. Our Party and the working class of the country have always been courageous in facing varions difficulties and obstacles and good at overcoming them. With the guidance of Marxism, Leninism, Mao Zedong Thought, Deng Xiaoping Theory and the basic line of the Party, a stronger comprehensive national strength, experience gained from the years of practice, and the active participation of the broad masses of workers, we can surely score new successes in the SOE reform and development, as long as all the Party members have confidence and fight together to achieve their goals. II. MAJOR OBJECTIVES AND GUIDING PRINCIPLES OF SOE REFORM AND DEVELOPMENT The 15th CPC National Congress and the First Plenum of the 15th CPC Central Committee proposed that in about three years, the majority of money-losing large and medium-sized State-owned enterprises get out of their difficulties, and that a modern corporate system be set up in the majority of backbone large and medium-sized SOEs by the end of the century. In pushing forward the restructuring and development of SOEs, major efforts should first be directed to the realization of this target. Priority should be given to key sectors and enterprises, and old industrial centers in accordance with the realities of different sectors and areas and the process of uneven development. Solutions to current major problems should be combined with long-term development so as to create favorable conditions for the cross-century development of SOEs. The objective for SOE reform and development by the year 2010 is basically completing strategic readjustment and restructuring, creating a more rational layout and structure for the State-owned economy, establishing a fairly complete modern corporate system, markedly improving economic performance, significantly strengthening the capability of scientific and technological development, market competition and risk resistant, and effectively playing the leading role of the State sector in the national economy, in accordance with the requirements for the fundamental transformation of the economic structure and economic growth mode, and with the needs of opening up further to the outside. These guiding principles must be followed in the promotion of SOE reform and development: (1) Developing diverse forms of ownership side-by-side with public ownership dominant. The ownership structure must be readjusted and perfected. Multiple forms for materializing public ownership must be actively explored. The ability of the State sector to control the national economy should be enhanced. And fair competition and joint development of economies of all forms of ownership must be promoted. (2) Strategically readjusting the layout of the State sector and restructuring SOEs. Efforts should be focused on managing well the whole State sector, pushing forward the rational flow and reoganization of State-owned assets, readjusting the lay-out and structure of the State economy, vigorously developing large enterprises and enterprise groups, and relaxing the control over and invigorating small and medium-sized SOEs. (3) Combining reform with restructuring, transformation and intensified management. To meet the demands of the market economy, efforts should be made to transform the operational mechanism of enterprises, enhance their overall quality, and construct a micro-base for industrial structure optimizing and high efficient economic operation. (4) Establishing a modern corporate system. Efforts must be made to achieve clearly established ownership, well-defined power and responsibility, separation of enterprise from administration, and scientific management, to perfect systems of decision-making, implementation and supervision, and to make enterprises corporate and market entities that enjoy full management authority and assume full responsibility for their own profits and losses. (5) Pushing forward scientific and technological advancement of enterprises. It is necessary to strengthen enterprise scientific development and technical transformation, attach importance to talented scientific and technical personnel, promote the combination of enterprises, universities and research institutes, form a technological innovation systems, and follow the path of intensive and sustainable development. (6) Comprehensively enhancing enterprise management. It is imperative to pursue scientific management, intensify basic work, improve operations, enhance efficiency, carry out diverse distribution forms with "to each according to his work" as the main form, and establish effective incentive and restraint mechanisms. (7) Establishing a competitive mechanism of survival of the fittest. We should encourage enterprise mergers, standardize bankruptcy procedures, divert laid-off workers, increase efficiency by downsizing staff and encourage re-employment projects. We should rely on all forces of society to expand employment and guarantee the basic livelihood of SOEs' laid-off workers. (8) Coordinating various supplementary reforms. Efforts shoud be made to transform government functions, establish well-defined State assets management, supervision and operation power and responsibility systems and ensure that the State assets' value be preserved and increased. It is necessary to strengthen the rule of law, maintain market economic order, complete the social security system, and help enterprises to increase capital, lower debts and burdens. (9) Relying on the working class whole-heartedly and giving full play to the role of Party organizations as the political nucleus within enterprises. It is necessary to strengthen the constructing of enterprises' Party organizations and their ideological and political work, upgrade the qualities of managers and administrators, uphold and improve enterprises' democratic management system with the workers congress as the basic form, and safeguard the legitimate rights and interests of workers in real earnest. (10) Promoting enterprises' ethical and cultural progress. Enterprises should intensify ideological, and moral education and technical training, comprehensively enhance the quality of workers and staff members, cultivate progressive enterprise culture, and promote the coordinated development of material civilization and socialist culture and ethics. III. STRATEGIC READJUSTMENT OF THE LAY-OUT OF STATE ECONOMY Under a socialist market economy, the leading role of the State-owned economy in the national economy mainly relies on its capability to control. (1) The role of State-owned economy should be materialized by solely State-owned enterprises, and by energetic development of the shareholding system through the establishment of State holding and joint-stock enterprises. (2) The State economy enjoys a dominant status in key industries and crucial fields related to the lifeline of the national economy, supports, guides and promotes socio-economic development as a whole and plays a key role in materializing the goals of the State's macro-economic control. (3) The State economy should maintain an appropriate quantity, with its layout further optimized and its quality further improved. In different stages of economic development, the proportion of the State economy in different industries and areas could vary, while the layout should be adjusted accordingly. The strategic readjustment of the layout of the State economy should be combined with the optimization and upgrading of industrial structures and the readjustment and improvement of the structure of ownership, while adhering to the principles of developing what should be developed, withdrawing what should be withdrawn, doing what should be done while leaving others alone. Currently, the State economy is over-distributed, with its overall quality remaining low, and the distribution of resources is not reasonable enough, a situation which must be tackled with great effort. Industries and sectors that need to be controlled by the national economy include: industries that are related to national security; industries that are naturally monopolized; industries that supply major products and services for the public; and pillar industries and backbone enterprises in high and new technology sectors. In other industries and fields, the entire quality of the State economy could be improved through assets regrouping and structure readjustment to concentrate their forces and strengthen the key SOEs. While maintaining State and collective economies as the main body, the development of non- public ownership, such as self-employed individuals and private businesses, will be encouraged and guided. Along with the continued development of the national economy, the development of the State economy has vast potential, with its size increasing, overall quality improving, and layout being rationalized, though the proportion it holds in the entire national economy may be somewhat decreased. The decrease will not affect the socialist nature of the country, so long as the public ownership remains as the main body, the State controls the lifeline of the national economy, and the controlling capability and competitiveness of the State economy are strengthened. Various means of realizing public ownership should be actively explored. State-owned capital could attract more social capital through the shareholding system in order to increase the functions of State-owned capital and strengthen the State economy's capability of control, influence and promotion. Large and medium-sized SOEs, especially superior ones and those suited to the shareholding system, should be turned into shareholding enterprises, in the forms of standardized listing, Sino-foreign joint ventures and inter-enterprise equity participation. A mixed ownership economy should be developed, while the State controls the main stake in key enterprises. Comprehensive plans should be made and effective policies should be adopted to speed up the layout readjustment of old industrial bases and the State economy in central and west China. For old industrial bases that are in greater difficulty, the State will increase its support in the fields of technological renovation, property regrouping, structural readjustment, as well as re-employment of laid-off employees from SOEs, and arrangement of social security funds. The State will assist in the development of central and western regions and ethnic minority areas by giving priority to infrastructure construction and increasing transfer payments from the exchequer. The central and western areas should develop comparatively superior industries and technologically advanced enterprises in line with their own conditions, in order to optimize and upgrade local industrial structures. While accelerating reform and development, the eastern areas should assist the economic development in central and western areas, under the principles of mutual benefit, mutual supplement and achieving joint development, by way of relocating industries, technology transfer, one-to-one assistance, and joint exploration. IV. PUSHING FORWARD STRATEGIC RESTRUCTURE OF SOEs Since the reform and opening-up drive started, the organizational structure of SOEs has seen positive changes, but is still irrational so far. This is due to serious overlapping in construction, and all enterprises, large or small, have an all-inclusive organizational structure, but have failed to establish specialized production and socialized coordination systems and an economy of scale, and lack market competitiveness. The strategic restructure of SOEs should be continued in accordance with their varying conditions. The State will give necessary support to a few enterprises that must be monopolized by the State, as they make efforts to meet the demands of a market economy, in order to let them play their due role better. Enterprises that have a certain strength in competitive fields should accelerate their development by attracting investment from different sectors. Enterprises that have a market for their products but are suffering from excessive burdens and management difficulties should regroup their assets and readjust their structure, through mergers and coalitions, to tap the idle assets. Bankruptcy and closing are the only options for enterprises that cannot find any market for their products, entail long-term losses but are not expected to turn round, and suffer from the drying up of resources. Small coal mines, refineries, cement works and glass factories and small thermal power plants that have been wasting resources, or are technologically backward, are manufacturing poor- quality products, and have caused severe pollution should also be forced to declare bankruptcy or closedown. The principle of "managing successfully large enterprises while invigorating small ones" should be adhered to. Powerful and competitive large enterprises and enterprise groups should be fostered, as some of them could be turned into trans-regional, transindustrial, trans- ownership and transnational large enterprise groups. Their superiority in capital operation, technological renovation and market-exploration should be brought to the forefront, so as to turn them into pillars of the national economy and the main force in international competition. The development of enterprise groups should abide by the law governing the economy, and enterprises should be regarded as the main body and capital as the link. Enterprise groups must be formed by the market and should not be produced by administrative means. There should not be a blind chase to make them as large and all-inclusive as possible. Efforts should be made to emphasize their main business and increase their superiority in competition. A flexible policy should be adopted for small and medium-sized SOEs to invigorate them. There should be active support for small and medium- sized enterprises, technology-based ones in particular, to make them "specialized, refined, special and new". In the meantime, they should set up close, cooperative ties with large enterprises to enhance their level of socialized production. Small SOEs should be enlivened through reorganization, coalition, merger, leasing, contract-based management and joint-stock partnership system, and through putting up for sale. Joint-stock partnership enterprises that have emerged in great numbers in recent years should be supported and guided, while the experience should be reviewed so as to improve them gradually. Any sales have to be carried out strictly in accordance with relevant State regulations. No matter which form is adopted, the opinions of the workers and staff members must be sought, while changes should be carried out according to conventional practice and priority should be given to substantial effects. Priority should be attached to the important role of small and medium-sized enterprises of various ownership in enlivening urban and rural economies, meeting various demands of society, absorbing surplus laborers, developing new products and promoting the development of the national economy. A system to serve small and medium-sized enterprises should be fostered to provide them with service in information and consultation, market exploration, fund and financing, loan guarantees, technical support, and personnel training. In the process of the strategic restructure of SOEs, the role of market mechanism should be brought into full play, while economic, legal and necessary administrative means should be adopted. The appraisal of assets must be standardized in mergers or purchase of enterprises that involves changes in property rights, in order to prevent the loss of State-owned assets and the evasion or canceling of bank debts and State taxes. Proper arrangements should be made for workers and staff members and their legitimate rights and interests must be protected. V. ESTABLISHING AND IMPROVING THE MODERN ENTERPRISE SYSTEM The development of socialized mass production and the market economy naturally calls for the establishment of a modern enterprise system, which is an effective way to combine public ownership with the market economy, and is the orientation of the reform of state-owned enterprises. It is imperative to proceed from China's actual situation, sum up experience, and fully understand and grasp the essence of the requirements calling for clearly identified property rights, clear-cut division between rights and obligations, separation of administrative and enterprise functions, and scientific management, in accordance with the expositions of the Third Plenum of the 14th CPC Central Committee and the 15th CPC National Congress on the establishment of a modern enterprise system. Special efforts should be made in the following links: (1) Continue to push forward the task of separating administrative and enterprise functions. The government performs the functions of shareholders in State-financed enterprises or State shareholding companies via its designated representatives, enjoys the rights to share profits from assets, make major decisions and select managers in accordance with the scale of investment, bears limited responsibilities for enterprises' debts, and will not interfere in the daily operations of enterprises. Enterprises will operate business independently according to law, pay taxes in accordance with relevant regulations, be responsible for preserving and increasing the value of the net assets of owners, and refrain from interfering in the legitimate rights of owners. In terms of personnel and financial management, Party and government departments at all levels should fully separate themselves from the economic entities they run or enterprises they directly administer. (2) Actively explore effective ways for management of State assets. It is necessary to gradually construct a network and mechanism for the management, supervision and operation of State assets in accordance with the principles of State ownership, classified management, franchised operation and division of supervision, and to establish and improve a strict responsibility system. The State Council, on behalf of the State, handles the ownership of State assets in a unified manner. The central and local governments exercise classified management of State assets, and large enterprises, enterprise groups and holding companies will be authorized to operate State assets. Capital contributors must provide sufficient investment. Localities will be encouraged to explore specific measures for the management of State assets. The experimental practice of sending special supervisors to work in grassroots enterprises will continue. It is also imperative to implement the guidelines of the 15th CPC Congress in an active manner, improve and standardize the system of the board of supervisors so that supervision over State-owned enterprises will be intensified, and State assets and its legitimate rights should not be infringed upon. (3) Introduce the standardized corporate system into large and medium- sized State-owned enterprises. The corporate system is an effective organizational form of the modern enterprise system. The practice of using corporate legal persons is the core of the corporate system. It is necessary to clarify the duty of councils of shareholders, the board of directors, the board of supervisors and managerial ranks. Also, a system for rectifying corporate legal persons should be formed, each legal person assuming responsible for his own work, coordinated operations and effective restrictions. Owners have the ultimate power of control over enterprises. The board of directors should safeguard the rights and interests of capital contributors, and should be responsible for the council of shareholders. The board of directors makes decisions regarding development goals and major operation activities of the company, employs business operators, and evaluates the work of the operators. It is imperative to bring into full play the supervisory role of the council of supervisors over financial affairs, directors and operators of enterprise. Party committee leaders of solely State- financed and State holding companies can enter the boards of directors and supervisors through legal procedures, and workers' representatives should be included in the boards of directors and supervisors. Leading Party members inside the boards of directors, supervisors, managerial ranks and trade unions can join the Party committee according to the Party Constitution and relevant rules. The Party secretary and chairman of the board of directors can be the same person, but in principle, the board chairman and general manager should be two separate posts. It is necessary to give full play to the role of the board of directors in making unified decisions on major issues and the effective supervisory role of the board of supervisors. Party organizations should perform duties according to the Party Constitution, and trade unions and workers' congresses should carry out their respective duties in accordance with relevant laws and regulations. Diversity of equities is conducive to the formation of a standardized corporate legal person management structure. It is necessary to develop companies featuring multiple investing entities, except for a small number of enterprises that should be monopolized by the State. (4) Concentrate efforts to gear enterprise operation mechanisms to the market. It is necessary to gradually establish mechanisms under which successful enterprises survive and loss-making enterprises are eliminated, operators can be promoted or demoted, personnel can be employed or fired, income can be raised or lowered, technology continues to be upgraded, and the value of State assets are preserved and increased. An income distribution system compatible with the modern enterprise system should be established, and the practice of members of the board of directors and the managerial ranks receiving rewards based on their work and contributions should be done under the guidance of state policies. Salary scales of workers should be determined by enterprises in accordance with the average salaries in different localities and the economic returns of enterprises. Within the enterprises, the principle of to each according to his work should be followed, but proper income gaps will be allowed. Means of production, such as capital and technology, will be permitted to take part in the distribution of profits. Effective measures should be taken to solve the current problem that the individual income of some monopolized industries is too high. VI. STRENGTHENING AND IMPROVING MANAGEMENT OF ENTERPRISES To intensify the management of enterprises and raise the level of scientific management is the inherent demand for the establishment of a modern enterprise system. It is also an important way for State-owned enterprises to change from losses into profits, and enhance competitiveness. It is necessary to attach high importance to and earnestly improve the management of enterprises, tighten up enterprise system, make innovations in management systems, eliminate the current trend of random decision-making, laxed management, undisciplined job performances, and low-level managerial abilities as soon as possible. It is imperative to strengthen the research of enterprises development strategies. Enterprises should adapt themselves to the market, formulate and implement clear strategies for development, technological innovations and marketing, and timely readjust these strategies in accordance with the changes in the market. It is necessary to practice scientific and democratic decision-making, and improve the level of decision-making. Risk management should be intensified to avoid major mistakes. Various kinds of rules and systems should be completed and improved. It is necessary to intensify fundamental work and change the situations in which there are no rules to follow, the rules are not strictly abided by, and violations of rules are not dealt with. It is necessary to establish a strict responsibility system at different levels and at different stages, and step up appraisals and supervision to make sure that responsibility is claimed for every job. The labor contract system should be perfected, and the practice of employment through competition should be introduced. It is imperative to tighten up labor discipline, and rewards and penalties should be given in an impartial manner so that workers' enthusiasm and creativity can be brought into full play. The awareness of law should be enhanced, and operation and management should be carried out according to law. It is necessary to pay attention to management weaknesses. Focus should be put on improving management of production costs, capital and quality. A unified national accounting system should be developed. It is necessary to timely compile charts of assets and debts, losses and profits, and cash flow in order to truly reveal the operation state of enterprises. Earnest efforts should be made to improve economic accounting and eliminate various loopholes. It is imperative to adhere to the principle of "quality first," introduce advanced standards, and do a good job in the full-process management of quality among all workers. It is necessary to insist on putting prevention first, and implement safety measures in production. Attention should be paid to management, protection and rational use of intangible assets of enterprises. It is necessary to combine intensified management with combating corruption and promoting honesty in work, tighten up auditing and supervision over economic activities of enterprises, and deal severely with tampering of accounting records, violation of financial disciplines, robbery and waste. Modern management technology, methods and tools should be widely used. It is necessary to sum up management experiences that have been proved effective in the past and to refresh them with new ideas. Management experience from advanced enterprises should be spread, foreign intellectual resources should be introduced, and modern management methods of overseas enterprises should also be borrowed. It is necessary to display the role of management specialists and provide consulting services for enterprises. Use of modern information technology should be strengthened, and sensitive and accurate information systems should be built. It is necessary for enterprises to set up rational organizational structures, and change overstaffed management ranks. VII. IMPROVING BALANCE OF SOE DEBTS AND ASSETS AND REDUCING SOE SOCIAL It is of utmost importance in effecting the SOE reform and development to gradually solve problems of the SOEs such as excessively high asset- to-liability rate, capital shortage and heavy social burdens. These problems should be solved step by step through various means according to the current macro-economic environment and the State financial power, as well as different circumstances. (1) Chinese banks should increase reserves for writing off bad debts caused by the acquisition and bankruptcy of big and mediumsized SOEs and closure of the mines whose resources have dried up, and for supporting key industries. State-owned and collectively-owned enterprises may enjoy relevant encouraging policies while acquiring SOEs. All the employees displaced by acquired, bankrupt and closed enterprises should be settled well in line with relevant State regulations. (2) Major SOEs, which are currently debtridden but have market for some of their products and have prospects for development, should solve the problem of high asset-to-liability rate by debt-to-equity transformation, together with the State banks' current reform on handling non-performing loans. Enterprises which adopt the reform of debt-to-equity should change their current operating mechanism and exercise standard corporate system, and their performance will later be independently appraised by financial and asset management firms. All this must be done in accordance with the rule of the market economy and related rules and regulations to avoid a general rush into action and possible losses of State assets. (3) Direct fund raising should be increased. SOEs which already meet the qualifications for listing may raise funds in domestic and overseas capital markets, and the proportion of public shares under current circulation should be increased appropriately. Other SOEs may prepare for the listing by debt reshuffling. State-owned and State-holding enterprises are allowed to participate in the allocation of new shares according to relevant regulations. A number of promising State-holding enterprises with good credibility will be picked out to reduce the State shares provided this will not affect the State control of shares. The State will use the surplus capital for SOE reform and development. The system of stock issuance and listing should be further improved to promote the healthy development of the securities market. (4) With government approval, unlisted SOEs can acquire cash by transferring their land use right or fixed assets for increasing capital, reducing debts and the enterprise restructuring. All this must be done in accordance with the country's laws and regulations, and the principle of openness, equality and fairness should be adhered to so as to safeguard the rights and interests of the State proprietors, banks and other creditors. (5) The State policies on the interest rate should be strictly followed to alleviate SOEs' interest burdens. Banks should set up a rational loan term to meet their reasonable demand for capital. Irrational loan terms should be redressed in a timely way; and no one should raise interest rate in disregard of regulations or in any other names. For those highly credible or less loan risky enterprises which conform to the State industry policies, the interest rate may be lowered appropriately. (6) Large SOEs capable of paying off debts may issue their bonds within government approved volume after appraisal by qualified intermediate agencies, and some enterprises may issue their bonds outside China with approval. All forms of illegal fund raising will be strictly forbidden. (7) SOEs will gradually break away from the social welfare responsibility so as to reduce their social burdens. Enterprises located in cities will shift the schools, hospitals and other social service agencies they have established to local governments for overall management. The money needed for this will be jointly covered by enterprises and the local governments for some time, and then gradually by the government, and some may be turned into enterprises. Independent industrial and mining areas should also work hard to create conditions for separating their social service agencies from enterprises. Local governments at all levels should take effective measures to actively push forward the work. Improving the balance of assets and debts of SOEs and reducing their social burdens should be combined with preventing and minimizing financial risks, promoting internal reforms, setting up new mechanism and strengthening scientific management in SOEs so that old problems will not emerge again. VIII. DOING A GOOD JOB OF WORKFORCE REDUCTION, RE-EMPLOYMENT AND SOCIAL SECURITY Laying off redundant workers to increase enterprise efficiency and helping laid-off workers to get re-employed is an important part of the State enterprise reform. Reducing the workforce should be combined with increasing efficiency so as to attain the goal of reducing cost, and increasing efficiency and profitability in the enterprises. Qualified SOEs should create economic entities that are financially independent and responsible for economic losses and profits of their own, by separating their main business from accessory businesses and diverting part of the workers to some auxiliary posts. In this way, some redundant workers can get re-employed, and the social employment pressure can thus be reduced. Procedures of laying off workers should be standardized, re- employment centers should be set up inside the enterprises, and basic living expenses need to be guaranteed for the layoffs to maintain social stability. The work of laying off workers should be adapted to the State financial power and the capability of society to absorb the unemployed. The fiscal spending structure should be readjusted, and enterprises, society and government should provide the funds necessary for the task. The government should make up the part of the funds which fall beyond the financial capabilities of the enterprise in the red and society. If some local financial departments truly have difficulties, the central finance departments will grant them some financial support through transfer payment. The system of ensuring basic living stander as for laid-off workers, providing unemployment insurance and guaranteeing minimum living standards for urban residents should be improved, and these three aspects of social security should be well combined. The policy of ensuring basic living for laid-off workers and the unemployed should be earnestly implemented. Great efforts should be done for re-employment of laid-off workers. Effective policies and measures should be adopted to increase job opportunities. The tertiary sector should be vigorously developed to absorb more layoffs. Workers should be guided to change their concept of employment, and training should be provided for laid-off workers to increase their re-employment potential. Preferential policies should be improved to facilitate the re-employment of laid-off workers, encouraging them to get re-employed as soon as possible by accepting jobs in non-public entities, starting their own business or becoming self-employed. As for those who start their own businesses, the government should grant them more support in registering with the industrial and commercial administrative departments, finding office sites, enjoying reduced or exempted taxes, and receiving bank loans. The labor market should be actively developed and regulated so that a market-oriented employment mechanism could be formed. Speeding up the building of the social security system is an important prerequisite for a smooth acceleration of the State-owned enterprise reform. The coverage of the social security services such as endowment, unemployment and medical insurance should be expanded according to law, and urban State-owned enterprises, collectively-owned enterprises, foreign-funded ventures and private businesses and their employees should all participate in the social security program, and hand in insurance premium. The collection of social insurance premium should be stepped up to increase the rate of premium collection and payment, and measures should be taken to collect the defaulted premiums to ensure a timely and full payment of the retirement pensions. A unified management plan of retirement pension funds at the province level should be further improved to enhance the regulating capability of the funds. Various measures such as selling off some State assets and readjusting the fiscal spending structure should be taken to expand new fund-raising channels for social security program and replenish the social security funds. Social insurance funds should be strictly managed, supervision should be strengthened on such management, and no insurance funds should be used for other purposes to ensure the safety and increment in value of the funds. Provision of social security should be gradually socialized. Retirees should leave the enterprises, receive retirement pensions at social service agencies and be managed by communities instead of enterprises. Veteran enterprise officials should receive due political and life treatment after retirement and should be provided with management and service. IX. SPEEDING UP TECHNOLOGICAL PROGRESS AND INDUSTRIAL UPGRADING OF SOEs To achieve sustainable, fast and healthy economic development, attention should be paid to keeping up with the global trend in readjustment of industrial structure and the changing demand of domestic and overseas markets, and speeding up the technological progress and industrial upgrading. Given the important position of the State-owned economy in the national economy, State-owned enterprises should lead others in technological renovation and industrial upgrading, actively explore new areas for development and bring their key role into full play. The direction and emphasis of the State-owned enterprises in technological progress and industrial upgrading should be: with the market as an orientation, using advanced technology to transform the traditional industries and strengthen technological renovation of the existing enterprises as a means of increasing product diversity, improving quality, increasing efficiency and spurring exports. Also, the goal of the reformed enterprises should be to hold an important position in new and hi-tech industries in electronic information, bio- engineering, new energy, new materials, aviation, space technology and environmental protection and master core technologies so as to serve as an industrial leader. Relationships should be well handled between improving quality and increasing output, between developing technology- intensive industries and labor-intensive industries, between developing China's new technologies and introducing foreign technologies, and between developing the economy and protecting the environment. With technological progress and industrial upgrading, a few large enterprises and enterprise groups should reach or be near the advanced world level in terms of product quality, production techniques, manufacturing equipment, and labor productivity, and occupy their certain shares in the world market; a number of enterprises and enterprise groups should be able to produce products with high added value by using their advanced technologies, and have strong competitiveness at both domestic and overseas markets; most enterprises should actively improve technologies and upgrade products and participate in market competition at home and abroad by making full use of the advantage of sufficient labor resources in China. Active and effective policy measures should be taken to support the technological renovation and industrial upgrading of the enterprises. When adopting an active fiscal policy to expand domestic demand, the State should focus on increasing input into the technological renovation of key industries, key enterprises, key products and manufacturing of important and advanced equipment. State policies should also support transformation of old industrial bases so as to achieve notable results in this regard. Subsidized bank loans should be extended to technological renovation projects which have good market prospects, high profitability, and support from State industrial policy; and tax incentives should be provided for investors of such projects. Industrial investment funds and risk investment funds should be established and developed. Funds should be pooled from domestic and overseas capital markets to support the technological renovation of enterprises, restructuring, and development of new and high-tech industries. Policy incentives should be offered to facilitate the transformation of technological achievements, and a technology market should be actively developed. Policy measures aimed at supporting enterprises' technological renovation should continue to be pursued, such as speeding up depreciation of fixed assets, increasing the amount of funds used for development of new products, offering preferential policies for reducing tariffs on imports of advanced technology and equipment. Enterprises are the principal participants in technological progress and industrial upgrading, and it is imperative to establish a system of technological innovation with enterprises as its center. Enterprises should reinforce their technological development personnel and increase input in that regard, and large enterprises should set up technological development centers, develop products with their independently owned intellectual property rights, increase technology reserves, and improve training of technicians. Industrial production, research and development of technology should be combined, technological personnel in scientific research institutions and institutions of higher learning should be encouraged to join enterprises or enterprise groups, development and spreading of applied technologies should be intensified, and input into experimental application of new technologies should be increased, so as to facilitate the translation of technological developments into real productive forces. Cooperation is needed to tackle major technological problems, and great importance should be attached to the role of technological experts. An incentives program should be established to attract talents and kindle the enthusiasm of the technological personnel, and intellectual property rights should be protected. X. CREATING SOUND EXTERNAL ENVIRONMENT FOR SOE REFORM AND DEVELOPMENT The SOE reform and development is a complex social system engineering project, which requires appropriate overall control and management as well as reforms in all related areas. (1) Basic balance in aggregate economy should be maintained. Efforts should be made to boost domestic demand, broaden rural and urban markets, increase employment, promote the sustained, rapid and healthy development of the national economy and prevent drastic fluctuations in the economic growth in order to create a favorable macro-economic environment for the development of SOEs. (2) Continued efforts should be made to open up to the outside world. Efforts should be made to push forward and improve the all-round opening in various fields and at all levels and encourage the SOEs to use both the domestic and overseas markets and the resources therein and raise their international competitiveness. Active efforts should be made to import advanced technology and stress on digesting and absorbing the technology and technological innovation. Measures should be taken to optimize the composition of the import and export commodities and expand overseas markets and foreign trade. The Efforts should be made to improve investment environment and increase and improve the use of overseas funds. Qualified SOEs may bring into full play their strong points to set up businesses abroad and open up international markets with necessary government policy support. (3) Measures must be taken to curb irrational and redundant constructions. The project fund system and the responsibility system of project legal entity should be strictly carried out so that those who make the decision undertake responsibilities and risks. The government should guide this through formulating industrial policies and providing information among others, encouraging investment to go to the projects designed to improve technology, and their products have ready markets and economic returns. There must be strict controls over new projects whose domestic production capacity has clearly exceeded market demand. (4) Various markets should be developed and normal economic order should be maintained. Continuous efforts should be made to improve the commodity market, foster and develop the market of production factors and establish a national unified market system beneficial to the rational flow of commodities, capital, technology and labor. Efforts should also be made to improve market regulations, standardize market conduct, increase market supervision and control, eliminate market administrative barriers and create a market environment for fair competition. Forceful measures should be taken to tackle the issue of arrears among enterprises, enhance the awareness of credibility and be strict with settlement disciplines. Smuggling, selling of smuggled goods, the making of counterfeit and inferior products and other economic crimes must be severely dealt with according to law. Efforts should be made to advance the tax reform, sort out and curb indiscriminate levies, fines and apportions to effectively reduce the burdens of enterprises. (5) The system of intermediary services should be improved. All social intermediary agencies must sever their links with government departments. Work should be done to standardize the conduct of accounting offices, law firms, notary offices, asset appraising agencies and consulting services to ensure objectivity, truth and fairness. Those that practice frauds must be investigated and affixed the responsibility and punished according to law. Associations of various industries should be rectified and standardized and strengthen their self-restraint. (6) A legal system of the socialist market economy should be established and improved. Efforts should be intensified to formulate and improve laws and regulations for maintaining market order, exercising macro- regulation and control, standardizing the main body of the market, and improving social security. The judicial and administrative organs must also strengthen and improve their law enforcement and supervision. Law- breaking activities that encroach upon the legitimate rights and interests of enterprises must be severely punished according to law. Efforts should be made to improve public order and create a sound social environment for the production and marketing activities of enterprises. XI. STRIVING TO BUILD A TEAM OF HIGHLY QUALIFIED BUSINESS MANAGERS To meet the needs of a modern enterprise system and to survive and grow amidst fierce competition, SOEs must build a contingent of highly qualified managers and nurture a large number of skilled entrepreneurs. The managers of the SOEs are generally good and have made important contributions to SOEs' reform and development. However, the development of a socialist market economy has set higher demands on SOE managers. They should not only be ideologically and politically qualified, law- abiding, have a high sense of responsibility and career-minded, but should also have good management abilities, and be familiar with the business they engage in and armed with modern management know-how and basic knowledge of finance, science and technology and laws, so as to make correct decisions in accordance with market changes. It is necessary to deepen the reform of the personnel system of SOEs. The Party must manage and supervise its SOE cadres. The central and local committees of the Party must strengthen management over the operation of the SOEs that hold the lifelines of the national security and economy. They must establish a system to standardize the selection, nurturing, management, appraisal and supervision of the cadres. In the selection of cadres, there should be a two-way system: While relying on its own judgment to promote cadres, they should also invite competition from society to compete with Party-selected candidates. SOE cadres should no longer be certified only on the basis of the official level. China must establish a talent market for business managers and a related talent database. Talented personnel should be used regardless of their localities and origins. Education and training should also be strengthened to improve the quality of the managers. It is necessary to establish a system to encourage SOE managers' outstanding performance and curb irresponsible conduct. The managers' incomes should be linked with their performance. Managers should not only get due material rewards, but also receive due honors for their dedication. A small number of companies have experimented with an annual manager salary system that includes share options. This can be carried out further on a trial basis, but should not be encouraged for nationwide application for the time being. There should be a system to standardize the allocation of salaries to managers and that system should be open and above-board. In addition, more work should be done to increase supervision over managers in areas such as use of funds, production and management, income distribution, personnel and self- discipline. Managers who cause heavy losses to their enterprises should be duly punished and removed from their posts; they should not be transferred to work in the same position elsewhere. XII. STRENGTHENING THE PARTY'S LEADERSHIP IN THE REFORM AND DEVELOPMENT OF SOEs Strengthening and improving the Party leadership is the fundamental guarantee for speeding up the reform and development of SOEs. To manage well SOEs in general, efforts must be made to establish a leadership system and organizational and managerial systems in them that conform to the law of the market economy and China's actual situation, to strengthen the building of their leadership, to give play to the Party organizations as the political core of enterprises, and to adhere to the principle of relying on the working class wholeheartedly. It is imperative to combine the effort to give full play to the Party's political advantages with that to make full use of market mechanisms so as to mobilize every positive factor to pool efforts for ensuring the smooth implementation of reform and development of SOEs. It is a major principle to adhere to the Party's leadership and bring into play the role of Party organizations as the political core of SOEs, and it is a principle over which we should never waver at any time. The Party organizations mainly play their role as the political core of SOEs in: ensuring and supervising the implementation of the Party and State policies in related enterprises; participating in making decisions on major issues, supporting the board of shareholders, board of directors, board of supervisors and managers or directors to exercise their functions and powers according to law; wholeheartedly relying on staff and workers, and leading and supporting trade unions and non- governmental organizations including the Communist Youth League as well as workers' congresses to function independently according to law and their respective regulations; guiding ideological and political education and ethical and cultural progress in enterprises in an effort to forge ranks of workers and staff members with lofty ideals, moral integrity, education and a strong sense of discipline; and strengthening the construction of the Party organizations themselves, improving education on the Party spirit and work style, and giving full play to the role of the Party branch as a fighting bastion and that of Party member as an exemplary vanguard. The Party organizations in enterprises should carry out the Party's basic line in earnest, center their attention on production and operation, and serve for the fulfillment of the Party's tasks and enterprise reform and development. Unremitting efforts should be made to improve the Party organizations' work and the ways they carry out activities and to further explore channels and ways for maximizing the role as the political core. Steps must be taken to strengthen and improve ideological and political education, unite the masses with the common ideal of building socialism with Chinese characteristics, guide workers and staff members in general to support and take an active part in the reform drive, and wholeheartedly help them overcome difficulties. The Party organizations in loss-incurring and merged or bankrupt enterprises, in particular, should make thoroughgoing and painstaking ideological work among workers and staff members. To succeed in SOE reform and development, conscientious efforts must be made to respect workers' status of being masters of their own enterprises, and to give full play to the enthusiasm, initiative and creativity of workers and staff members. Resolute measures must be taken to protect workers' economic interests and safeguard their democratic rights. More should be done to straighten out labor relationships, exercise equal rights according to law, and earnestly carry out labor contract and collective contract systems. The roles of trade unions and workers' congresses in democratic decision-making, democratic management and democratic supervision should be enhanced. The democratic management system with the workers' congress as the basic form should be adhered to and improved, and the practice of democratic appraisal of enterprise leaders by the workers and opening corporate affairs to public scrutiny should be adopted. It is necessary to intensify the construction of the contingent of workers and staff members and arm their minds with Deng Xiaoping Theory and the Party's basic line. Major effort should be devoted to carrying forward patriotism, collectivism, socialism and the spirit of building an enterprise through arduous effort, deepening the education in current situation and tasks as well as democracy and law, and guiding workers and staff members to foster a correct world outlook, a correct outlook on life, and correct values. Efforts should be made to improve workers' professional techniques and labor skills training, promote ethical and cultural progress in enterprises, develop corporate cultures, conduct wide-ranging activities to create trades, enterprises, teams and groups excelling in cultural and ideological progress, encourage workers to vie for titles of cultured workers, foster fine professional ethics of cherishing posts, devoting wholeheartedly to work, being honest and trustworthy and making contributions to society, advocate scientific spirit and combat feudal superstitions, and consistently enhance workers' morals and scientific and cultural levels. Party committees and governments at all levels should stand firmly at the forefront of the SOE reform, emancipate their minds, be practical and realistic, follow the objective economic law, and respect the masses' pioneering spirit. Earnest steps should be taken to improve leading styles and, based on the actual situation of SOEs of various trades, make thorough investigations and studies, summarize new experience, study new situations, solve new problems, and unite with and lead officials and the masses of people to overcome difficulties and press ahead. The plenary session calls on all Party members to closely rally around the CPC Central Committee with Comrade Jiang Zemin at the core, hold high the great banner of Deng Xiaoping Theory, act in the spirit of the 15th National Congress of the CPC, earnestly implement all the policies and plans of the CPC Central Committee, and work hard with one heart and one mind and in a down-to-earth manner for fulfilling the goals set for reforming SOEs and getting them out of difficulties, creating a new situation for SOE reform and development and advancing the great cause of building socialism with Chinese characteristics into the 21st century in an all-round way. |
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