Chinese state firms vouch for expansion

Written by Reuters | Beijing | Updated: Nov 10 2012, 09:13am hrs
Chinas big state-owned enterprises argued for continued expansion on Friday, echoing outgoing President Hu Jintaos comments urging more investment in major government firms and curtailing hopes of reform in the bloated sector. Party delegates spent day two of the 18th Communist Party Congress holding public debates on Hus speech at which they read out bits that they particularly liked. Reuters reporters heard no one disagreeing with what Hu said in a nearly two-hour-long speech.

At the opening of the congress on Thursday, Hu stressed the importance of continued one-party rule and how it was threatened by corruption, a reference to the downfall of one-time high-flying politician Bo Xilai. He also suggested a further strengthening of the state in strategic sectors, with the possibility of more market-oriented competition in other sectors.

The direction of the SOE (state-owned enterprise) reform should be: SOEs must be more market-oriented and they must keep strengthening their vitality and influence, Wang Yong, the head of a commission on supervising and administering state-owned assets, told reporters. Scholars may have different views, but thats the development need of the enterprises and the state.

Hu had said on Thursday that Beijing must unwaveringly consolidate and develop the public sector of the economy. (We should) invest more state capital in major industries in key fields that comprise the lifeline of the economy and are vital to national security.

But outgoing Premier Wen Jiabao vowed in a speech earlier this year that Beijing would push ahead with monopoly-busting. We must move ahead with reform of the railway, power and other industries, complete and implement policies and measures aimed at promoting the development of the non-state economy, break monopolies and lower industry thresholds , he had said.

State-owned enterprises and affiliated businesses account for more than half of output and employment in China, the worlds second-biggest economy. They include power grid-operator State Grid, the worlds seventh-biggest company. Oil giants Sinopec Group and China National Petroleum Corp, parent of PetroChina, rank fifth and sixth, respectively. Of the 70 mainland companies on the 2012 Fortune Global 500 list, 65 are state-owned.

Chinese reformers and Western governments say their sheer size and market dominance creates a drag on the economy through vast opportunity for corruption and waste, leading to higher costs for consumers. Calls for reform built up as factions manoeuvred ahead of the once-in-decade leadership transition at the congress. When Xi Jinping, Hus anointed successor, is in place he will be under immediate pressure to break the grip of inefficient SOEs and reinvigorate Chinas three-decade-long economic miracle.

But he will have to deal with the divisions within the party on policy. Critics claim that without further reform of the state sector, Chinas growth will stagnate. They call for equal opportunity for private firms, which provide most of the new jobs in China. On Friday, data for October showed the economy was pulling away from its slowest growth in three years. Analysts attributed that to a raft of pro-growth policies rolled out by the government in recent months.