The content of state-owned enterprise property right reform and countermeasures

The reform of state-owned enterprises has gone through a history of more than twenty years, reviewing the process can be roughly divided into three stages.

The first stage: 1979-1986, the reform of state-owned enterprises at the level of the right to operate. The traditional state-owned enterprises is the principal that the government monopolizes the enterprise nearly all of the luxury of surplus rights, and there is no incentive to create surplus products. Therefore, state-owned enterprises will inevitably be in a long-term inefficient operation. It is not difficult to see that the transfer of state-owned enterprises, the right to operate, is bound to produce incentives for the enthusiasm of the operator, and then conducive to change the past concentration of power and the externalization of the situation, so that the enterprise to become "self-supporting, self-management, self-restriction, self-development" of the economic entity.

In response to the traditional state-owned enterprises, the lack of separation of government and enterprises, the lack of autonomy of operators and the shortcomings of inefficient operation, after the Third Plenary Session of the Eleventh Central Committee of the People's Republic of China, the central government promulgated a series of documents to expand the autonomy of enterprises, and promote the reform of state-owned enterprises at the level of the right to manage. In the same year, the State Council issued five management system reform documents, including Several Provisions on Expanding the Autonomy of State-Owned Industrial Enterprises in Business Management, and carried out a pilot project in Sichuan Province to expand the autonomy of enterprises. In accordance with the central policy, the government transferred to enterprises fourteen management rights, including production autonomy, the right to purchase raw materials, the right to employ labor, and the right to sell products. The transfer of the right to operate means that the enterprise operators have a certain degree of residual control and residual claim rights, enterprise operators and producers of the production of enthusiasm increased significantly.

Many articles reviewing this stage of decentralization and profit-making have argued that it is a shallow, expedient reform. However, it is precisely because of this transitional institutional arrangement that the reform of state-owned enterprises has achieved significant results. 1979 state-owned industrial enterprises realized a 10.1% increase in profits and taxes over 1978, higher than the average growth rate of 1957-1978. The state's fiscal balance also shifted from a fiscal deficit of 1.017 billion yuan in 1978 to a fiscal surplus of 13.541 billion yuan in 1979. Employees' real wages increased by 7.5 percent over the previous year. The reasons for the success of the reforms at the level of the right to operate can be attributed to the following: First, the decentralization of power and profit-making was based on the concession of the central government's interests as an entry point, and the beneficiaries were various social interest groups, including state-owned enterprises. Reform under the benefit of all subjects of interest, not only to promote the resistance is small, and will also have a strong incentive effect on each economic subject, is conducive to mobilize the enthusiasm of all subjects to participate in economic activities. Secondly, the reform at the level of the right to operate is a reform carried out within the former state-owned economic system, which does not change the original ownership framework, but only adjusts the interests between the government and state-owned enterprises. This kind of adjustment does not involve the ideological issues of "public or private" or "capital or social", so there is less resistance from social consciousness and traditional concepts, and the reform can be accepted by the whole society. Thirdly, although decentralization and concessions represent a partial loss of the central government's interests, the absolute amount of the central government's gains will increase as the total volume of the economy increases; at the same time, the increase in the total volume of the social economy will bring about an improvement in the incomes of other members of society. Therefore, the reform of state-owned enterprises' management right is a kind of Pareto improvement that benefits the vast majority of the society.

The second stage: 1987-1992, the reform of state-owned enterprises from the management right to the ownership level of the transition. Starting from 1986, the reform of state-owned enterprises began to transition from the right to operate to the ownership level, but in the deep reform involving property relations, two different ideas and two different choices for the reform system appeared at the same time.

One way of thinking is that the reform of state-owned enterprises is still limited to the original property relations, while further promoting the reform of the management right level. The system corresponding to this understanding is the enterprise contracting system. The central government's decision-making department favors this kind of reform idea and reform program, so from 1987 to 1992, state-owned enterprises have experienced two rounds of contract system reform.

At the beginning of the contracting system, it did mobilize the enthusiasm of enterprises and workers, and promoted the development of the state-owned economy. 1987 and 1988, China's industrial growth rate was 14.1% and 20.7% respectively. In 1987 and 1988, the growth rate of China's industry was 14.1% and 20.7% respectively, and the profits and taxes realized by enterprises in 1987 were 8.0% higher than those in 1986, and in 1988 they were 18.2% higher than those in 1987, with losses declining year by year, and the economic efficiency improved. However, during the implementation of the contracting system, there was a situation in which the enterprises increased their efficiency, the economy grew, and the state financial income declined on the contrary. In 1987, the first year of the contracting system, along with the rapid growth of the national economy, the financial revenue has been low growth, the proportion of financial revenue in the gross domestic product from 1986, 20.8%, plummeted to 18.4%, a year drop of 2.4 percentage points in 1988, and then fell sharply to 15.8%, than in 1987, a drop of 2.6 percentage points.

The results brought about by the contracting system attracted strong criticism and opposition from all sectors of the country. A common criticism was that after the devolution of power and concessions, the state finances could no longer afford to continue to make concessions. The contracting system, however, has made even greater concessions to enterprises, resulting in a serious loss of state revenues. There is also an analysis that the contracting system is still a soft constraint on the behavior of enterprises. Enterprises are only responsible for profits but not for losses. This not only reduces the proportion of state revenue to national income, but also creates short-term behavior and "opportunistic behavior" (Liu Shijin, 1993).

The advantages and disadvantages of the contracting system for the reform of state-owned enterprises still need to be seriously discussed before conclusions are drawn, but there is a realization that can be formed **** knowledge, that is, if there is no deep-seated change in property relations, the behavior of state-owned enterprise operators is very easy to short-termism, and the state's supervision of the operators is very difficult. In the contracting system, the State and enterprises are in an incomplete contractual relationship, and one-to-one negotiations between the Government and enterprises are costly, and it is impossible to stipulate the details of the contract on a case-by-case basis. Therefore, the enterprise contractors can rely on the full residual control rights legally or illegally to pursue the maximization of their own interests, and thus the emergence of short-term behavior and opportunism is not surprising.

Unlike the reform of the contracting system, some scholars and experts in the domestic theoretical community have put forward the idea of deepening the reform of the ownership level of state-owned enterprises, and the system corresponding to this idea is the shareholding system. Shareholding reform is an important advancement in the reform of state-owned enterprises at the ownership level. Its fundamental purpose is to change the enterprise property system monopolized by the state, so that the formation of diversified property rights structure within the state-owned enterprises, optimize the governance structure within the state-owned enterprises, for the implementation of shareholders, the board of directors and managers to carry out effective incentives and constraints.

The pilot of state-owned enterprise shareholding system began in 1986, but mostly in state-owned small and medium-sized enterprises. The impact of the pilot is not widespread, the main problem is that the non-state property subjects are not enough to intervene, "can not find non-state subjects to cooperate" is a common reflection. In the face of a serious shortage of diversified subjects, the pilot shareholding system was often launched among employees within the enterprise. Due to the limitations of the fund-raising ability of the employees within the enterprises, the shareholding reform naturally failed to achieve the expected goals. Moreover, due to the lack of standardization of the shareholding system at that time, the employees' shares of many pilot enterprises evolved into a kind of internal loan, which was eventually repaid. During this period, due to the negative impacts of the contracting system and the underdevelopment of the shareholding system, the reform of state-owned enterprises was once in a state of wavering and wandering. The result of the reform can also be imagined.

The third stage: 1992-2002, the reform of the establishment of a modern enterprise system. 1993, the Third Plenary Session of the 14th Central Committee adopted the "Decision of the Central Committee on the Establishment of a Socialist Market Economy System", clearly put forward the objectives and steps for the establishment of a modern enterprise system for state-owned enterprises. 1994, the establishment of a modern enterprise system after the pilot in the state-owned enterprises. modern enterprise system was launched in state-owned enterprises on a pilot basis after 1994. The goal of establishing a modern enterprise system is to make state-owned enterprises become modern enterprises with "clear property rights, clear powers and responsibilities, separation of government and enterprises, and scientific management" through the reform of the property rights structure. Under the constraints of the modern enterprise property rights structure, the government can no longer directly control and operate state-owned enterprises. Its will can only be implemented and expressed in the liquidation and transfer of state-owned enterprises based on the ultimate ownership. Of course, the government can also participate in the decision-making of major issues of state-owned enterprises through its agent, i.e., state-owned asset management company or holding company, but this decision-making is also limited by the amount of capital and shares held by the owner. Therefore, in the modern corporate organizational framework, developmentally, the will of the government is diminishing, while the will of the shareholders can be guaranteed by the organization and system. Moreover, in a modern company, rights, duties and obligations are defined by law and are limited by the amount of capital contributed and shares held. Decisions can only be made by voting after discussion among the board members, which can avoid the dictatorship of the chief's will and individual will, thus providing an organizational basis for the realization of scientific decision-making. But the reform of the ownership level of state-owned enterprises is not a simple process. The difficulty still lies in the pluralistic, especially the insufficient supply of non-state property subjects. And the current existence of the "one share" of the property rights structure, is the key to prevent the optimization of the internal governance structure of the company.

Second, the existing problems in the reform of the property rights system of state-owned enterprises

First of all, the difficulties encountered in the establishment of a diversified property rights structure. So far, whether in the limited liability company, or in the joint stock limited company, the state-owned and state-controlled structure still occupies a considerable proportion. This kind of property right structure often brings the following consequences. (1) In wholly state-owned companies, due to the lack of multiple shareholders in the property rights structure, the formal organization of the company is still nothing more than a rehash of the original state-owned enterprises, and the board of directors is basically the original team of the state-owned enterprises. In the "licensed company", many of the shortcomings of the traditional state-owned enterprises still exist, of course, it is difficult to realize the separation of powers and responsibilities and scientific management. (2) In state-controlled joint-stock companies, the board of directors is still composed of government officials, the chairman of the board is often the secretary of the party committee, and the appointment of the general manager has to be approved by the organization department. Such a pattern of separation between officials and entrepreneurs often makes the head of the company at a loss between performance goals and corporate goals, and it is difficult to get rid of administrative interference and make truly scientific decisions. (3) In all kinds of state-owned companies, the state-owned shareholders are the agents entrusted by the state-owned capitalists, so there is still the problem of the absence of the real owner. If the goals of the agent and the goals of the principal are in conflict, it is difficult to solve the problem of "insider control" in state-owned companies, which will inevitably face greater agency risk.

The defects of the company's property rights structure affect the company's governance structure. In the general joint-stock company, the more prominent problem is often the proxy relationship between the board of directors and the manager. As the operation and management of the company is more and more dependent on professional managers, managers hold the actual control of the company, so how to incentivize and supervise managers is becoming more and more important. The governance structure of state-owned companies is more complicated due to the defects of the property rights structure. The first is that the board members of state-owned companies are generally representatives of the ownership of state-owned assets rather than the owners themselves, so the principal-agent relationship between the shareholders and the board of directors, or the supervision of the board of directors by the shareholders, becomes a primary difficulty. For example, the recent successive disclosure of listed companies in the capital market to deceive shareholders with false profit information is a manifestation of "insider control" and short-term behavior of listed companies. Secondly, the board of directors and managers of state-owned companies are generally more powerful than the managers in terms of control. In the chairman of the board of directors and general manager of the enterprise, the chairman of the board of directors is responsible for decision-making and operation and management rights in one; in the chairman of the board of directors and general manager of the separation of enterprises, the general manager of the operation and management of the authority is often subject to the chairman of the board of directors of the constraints. Therefore, no matter what, it is difficult to form a reasonable distribution of power. In addition, members of the supervisory boards of state-owned companies are appointed by the government in the same way as the boards of directors, so they are often virtually non-existent, and may even become partners with the boards of directors in "conspiracy". In wholly state-owned and state-controlled enterprises, the board of directors, managers and supervisory boards are often apportioned among the original "troika" of enterprises, with the party secretary serving as chairman, the factory director serving as general manager, and the labor union chairman serving as chairman of the supervisory board. The envisioned pattern of checks and balances is easily replaced by a pattern of internal controls. In the end, many of the problems that have arisen in state-owned companies are due to this "one share, one big" shareholding structure.

Secondly, the traditional concepts and stereotypical ideology hinder the reform of state-owned enterprises. Traditional concepts and stereotypical ideology of the obstacles to state-owned enterprises is mainly manifested in the understanding of the transfer of property rights in state-owned enterprises. As early as in the mid-1980s, China began to try to sell and auction small state-owned enterprises. But to this day, the transfer of property rights in state-owned enterprises is still in a difficult situation. There are many reasons for this, but an important obstacle comes from traditional concepts and outdated ideologies. The first conceptual obstacle is about the relationship between the loss of state-owned assets and the loss of sitting. The basic way to protect state-owned assets should be movement, not immobilization; immobilized state-owned assets cannot realize the preservation and appreciation of value, which actually means loss. In the process of movement, state-owned assets may also be lost to a certain extent. As long as the gain of movement is greater than the loss of gain, movement is necessary. Because of the fear of loss and not dare to flow, the result will cause the state-owned assets sitting loss. The loss of sitting is also incalculable. The second conceptual obstacle is that only the transfer of loss-making enterprises, not the transfer of profitable enterprises. In quite a long period of time, the policy only allows the transfer of property rights of state-owned enterprises with small profits and losses. As for the profitable enterprises, firstly, the policy has not indicated that it is allowed, and secondly, even if the policy is allowed, it will not be transferred. This is because the government still expects it to generate revenue for it. Under these conditions, SOEs did not seize the opportunity to sell when the market demand was strong and the price of the enterprise was high. And when the market demand is lower and the enterprises suffer large losses, they cannot be sold even if they want to. Contrary to the above mainstream policy orientation, some provincial governments seized the opportunity of the rising demand for mergers and acquisitions of state-owned enterprises by foreign enterprises and private enterprises after the 14th National Congress to sell and realize the better state-owned enterprises in a timely manner. On the one hand, the state-owned enterprises into an independent economic entity, the government to reduce the burden; on the other hand, and sold at a good price, to realize the preservation of the value of the state-owned economy. The third conceptual obstacle is a kind of "only evaluation theory". State-owned assets in the market transfer, if the transaction price is lower than the evaluation price, does it mean that the loss of state-owned assets? The answer is no. Because the appraisal price is often an expected price of the asset supplier, or called the supply reference price. It must be negotiated with the demand side of the assets in the market, in order to reach a mutually acceptable market price to achieve transactions. To engage in market economy should follow the market rules, in a standardized market. The transaction price is fair and reasonable. The assessment of the price as a measure of whether the loss of state-owned assets is obviously inappropriate. Market price is affected by the law of supply and demand. In the current state-owned assets supply exceeds demand in the buyer's market pattern, the more the economy is in the doldrums, the more the loss of state-owned assets, the lower the value of the enterprise will be, the lower the market price will be. This is a very cruel reality.

Third, the deepening of the ownership structure reform of the countermeasures to choose

Continuing to deepen the reform of the ownership structure is the main topic to solve the existing problems of state-owned enterprises. However, to accomplish this step, a series of related institutional arrangements are still needed, in order to achieve the result of incremental reward through the dependency path, and to promote the further deepening of the reform of state-owned enterprises' property rights.

1. Continue to lower the threshold for entry into state-owned enterprises. The fundamental change in the ownership structure of the state has to be the entry of diversified investment subjects. Therefore, continue to lower the threshold of entry of state-owned enterprises should be a feasible countermeasure. Some people may think that the assets of state-owned enterprises has fallen to the bottom line, almost unprofitable, and therefore no one will ask. But in fact, the problem does not lie in the external entrants, but in people's perception. The recent case of the Oriental Asset Management Company (OAMC), which revitalized 60 million yuan of non-performing bank assets with 5 million yuan, has given us a great insight into the fact that the policy system given by the decision makers of the state-owned economy is the decisive factor affecting the number of entrants. Of course, for different investment environment and high quality and fast service are more important conditions than tax incentives; for domestic private capital, price and tax concessions are still very important, and for the internal operators and employees of enterprises, they can be gradually cultivated to become owners of enterprises in the form of dry shares and option shares, which is also an alternative way. Lowering the entry threshold of state-owned enterprises is to realize the diversification of equity of state-owned enterprises, and the diversification of equity in addition to the purpose of financing, more importantly, through the diversification of equity structure to solve the main body of the responsibility of the state-owned enterprises, scientific decision-making and risk-sharing and a series of systemic and institutional problems.

2, improve and deepen the exit system of state-owned enterprises. Currently in the state-owned enterprises to exit the problem, there is a need for certain conceptual breakthroughs and institutional innovation. First of all, the field of the scope of withdrawal. According to the general understanding, in the field of public **** goods production, such as national defense facilities, post and telecommunications, railroads, roads and bridges, etc.; special products in the field of production, such as mining and smelting of rare metals, minting and high-tech involving state secrets, etc., but also need to be controlled through the form of wholly state-owned or state-owned property rights, in order to ensure that the national economy as a whole to operate effectively. Other than that, in most competitive fields, state-owned enterprises should be free to enter and exit in competition. In the reality of operation, some fields which were once considered to be of national importance and must be monopolized by the state have been changed. Foreign investors have begun to enter in areas such as communications, road and bridge supply of public * * * goods, and in basic industries such as iron and steel and petroleum exploration and extraction. Practice has proved that the effective control of the State over the national economy as a whole should be based mainly on policy guidance and not necessarily on the direct operation of State-owned enterprises by the State. An effective fiscal policy, monetary policy and industrial policy may produce greater results than the direct operation of state-owned enterprises. Second is the choice of strategic steps for the exit of state-owned enterprises. The traditional way of thinking is often to wait until the state-owned enterprises can not be thought of exit, and "beautiful girl" is not willing to "first married" out. This kind of apple rotten before thinking of dealing with the way of thinking, will only make the state-owned enterprises in a passive competitive environment can not be grasped. State-owned enterprises are generally by the government's decision-making investment and expansion, and relatively high taxes and make the development of state-owned enterprises is not enough energy. In such a situation, enterprises are unable to implement their own business and development strategies or decide on their own exit strategies. In addition, there is the problem of layoffs and resettlement of employees of state-owned enterprises who have changed their careers. As state-owned enterprises are generally in the traditional large industrial sector, they absorb a large number of state-owned enterprise employees, and workers specialize in a fine division of labor, with a strong dependence on large industries. Once laid off, they are less able to switch occupations and have greater difficulty in resettlement. At present, some resource-based enterprises are facing a particular stage of resource depletion and enterprise decline. Some cities and their populations are dependent on coal resources for survival, and once the resources are depleted, the entire city's industry and population will face an existential crisis. In response to this situation, the government should pay more attention to the choice of strategy in the exit process of state-owned enterprises. It should include the prediction of the life cycle of the enterprise or industry in the formulation of the development strategy of the enterprise or industry, and the strategic arrangement of preventing the decline and strengthening the competitiveness, including the capital reserve when exiting.

3. Establish a relatively stable team of state property agents. In a state-owned company where the board of directors has a great deal of residual control over the enterprise and at the same time the board of directors is represented by a non-owner, the board of directors and managers are in the same position of being incentivized and supervised. This can make the organization of incentive and constraint systems more difficult. In particular, incentives for the stability of state property agents are necessary. An effective long-term incentive mechanism can align the interests of the firm's operators with those of the owners over the long term and keep the short-term behavior of the operators to a minimum. It also has the potential to nurture good operators into new shareholders of state-owned enterprises. The idea of introducing the more popular international incentives - annual salary system and stock option incentives - since the 1990s in China is of practical significance for the expansion of operators' residual claim rights. However, compared with the imperfect capital market in China, the implementation of these incentives requires certain conditions and practical process. At present, due to the constraints brought about by the retirement system of state-owned enterprises, so that some quite successful operators will often be on the eve of the retirement of the psychological imbalance of the "ambition not yet rewarded", and then produce the individual's contribution to the enterprise into a variety of personal current earnings of gray tendencies. If change the term of office system of state-owned company operators, can be in a considerable degree to avoid the short-term behavior of the operator, in exchange for the operator's focus on hard work, which is very conducive to the formation of a relatively stable team of state-owned property agents. This is a low-cost incentive system. At the same time, through the option shares or options can make some excellent state-owned enterprises operators into new important shareholders, which in turn can make his business talent more active in the growth of the enterprise, and become an important force for the development of the enterprise. Stabilizing the team of state-owned enterprise operators is not only the need for reforming the internal property rights structure and governance structure of state-owned enterprises, but also the need for sustainable development of state-owned enterprises. The world's large enterprises can endure an important factor, is to have a group of unswerving operators shareholders. In this regard, we should also raise awareness and choose targeted countermeasures.

The transformation of state-owned enterprises is a systematic project, in addition to the policy measures of reform, the government's relaxed environment, a favorable market competition environment, as well as the international peace environment must be complementary. In this regard, we must seize the favorable opportunity of joining the WTO to create better conditions for the deepening of the reform of state-owned enterprises on all fronts.