Some European and Chinese private firms to push for SOE reform
August 28, 2019 Category China News Round-up, Weekly
European businesses are trying to make common cause with Chinese private firms in an effort to push Beijing to reform state-owned enterprises (SOEs). Foreign companies and the Chinese private sector have long shared concerns about preferential treatment and regulatory red tape, but deteriorating economic conditions and the slow pace of reform from Beijing have pushed the two closer together. European business sources speaking on condition of anonymity said some businessmen and women had been trying to find new ways of working together with Chinese private firms to push for reform.
But taking joint action with foreign firms can be politically sensitive for private firms in China, and the Europeans were focusing more on their common frustrations to strengthen the case for reform, which they regarded as crucial in ensuring a fair operating environment. Other sources familiar with the matter said European businesses were expected to focus on “competitive neutrality” to coax Beijing into reforming its state sector. The concept of competitive neutrality was first devised by Australia in the 1980s, and was picked up by the OECD in 2011 as a way of promoting a “level playing field” for all kinds of enterprises, and discourage state protections, like preferential subsidies or other limits on investment, in strategic enterprises.
Some in China have signaled that this may be the way for reform to proceed. In October last year, People’s Bank of China Governor Yi Gang said that China was considering applying the principle to its state sector, and the term also featured in Premier Li Keqiang’s work report delivered at National People’s Congress (NPC) in March. But deeply entrenched political interests are still standing in the way of reform of the state sector, said Li Yong, Researcher in international trade at China’s Ministry of Commerce (MOFCOM). Li said foreign and Chinese private firms were “natural” partners when it came to reforming the sector, but the pace of reform was going to be slow.
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