Sept. 16, 2015
21st Century China Opinion
Has reform finally come to China's SOEs? 

From the Source (Reuters)
"In a long-awaited reform document published on Sunday, the government said it would introduce 'mixed ownership' to its sprawling state sector, heralding its most far-reaching overhaul of SOEs in two decades, a task that has become more pressing as the economy slows."   

Our Take
The Communist Party and the State Council just unveiled the official guidelines for reforming state-owned enterprises (SOEs), nearly 22 months after the Third Plenum promised the deepening of economic reforms. The key steps include allowing private capital to enter previously noncompetitive, state-dominated sectors through mixed ownership companies, reforming the state asset administrative system and restructuring shareholding by giving the state priority shares (or "golden shares").

One confusing aspect of these reforms is the purported "move from state administration of assets to capital." In the past, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) has both owned and managed SOEs involved in production. The guidelines now encourage the formation of state capital investment corporations, an arrangement reminiscent of Singapore's Temasek. Thus, the power and relevance of SASAC is curtailed.

The proposal of "golden shares," which is a nominal but decisive share that can outvote all other shares, was used by the United Kingdom in the 1980s in its privatization efforts and also by the former Soviet Union. The approach, however, will be taken in a much more experimental and incremental fashion in China.

Like previous reform efforts, however, whether China will succeed in greater marketization with the latest guidelines would depend on the details of implementation and coordination with other reforms. None of the current measures on their own guarantee such success. The Party still maintains its leadership over SOEs by controlling personnel appointment. The financial sector, which has been explicitly or implicitly subsidizing SOEs, is still largely owned and operated by the state (China's financial reforms have focused mostly on monetary and exchange policies so far, not structural composition). As such, inviting private capital through mixed ownership or allowing greater commercial autonomy through investment corporations may not achieve desired effects. The Party and government are still SOEs' ultimate authority and last resort.

Field Notes from China:
Selections from the Chinese-language Media
U.S. should reflect in wake of false espionage allegations

Summary: Last week, the U.S. Department of Justice made a stunning announcement: It had falsely arrested an accomplished physicist from Temple University on charges of espionage for China. Even more embarrassing, it appears the error stemmed from the FBI's inability to understand the technology the man, Xi Xiaoxing, was accused of stealing. As it sorts through the wreckage of a botched investigation, the Chinese are asking if the case didn't stem from an overzealousness on behalf of U.S. law enforcement.  

Excerpt from the story: "The U.S. has become increasingly vigilant about Chinese espionage activities, and given the rise of China and its influence on the strategic landscape, Washington's mentality is natural. However, after multiple botched cases, the U.S. should have realized that it was just too sensitive. This level of emotion without restraint will not only endanger the relationship between Beijing and Washington, but (it) will also worsen racial tensions in U.S. society. Be it prejudice of ideology or the fact that the U.S. itself has conducted too many espionage or secret network operations, public opinion in Washington and the entire U.S. believes China is the most aggressive country toward the U.S. in terms of spying. Such a 'portrait' is making ordinary Chinese people feel like they are being 'flattered' in a strange way, as they normally don't believe that Chinese intelligence agencies are capable of driving the U.S. so crazy."

Source: Global Times
The battle against Uber continues
专车管理办法将出台 兼职私家车或边缘化

Summary: Since it first began operations in China in February 2014, the company, which has dominated other international markets, has found the road paved with regulatory roadblocks. As it now stands, the ride sharing app is being crushed by its largest domestic competitor, Didi Kuaidi. Yet rumors of new rules limiting private passenger cars from joining either service, might force Uber to make a strategic retreat, a la Google in 2010.  

Excerpt from the story: "The government is mulling new rules that would prevent private cars from offering rides through popular car-hailing mobile applications like Uber and Didi Kuaidi. Any vehicles used in the car-hailing app business would have to be registered for commercial use with transport authorities under a proposed nationwide regulation that will soon be announced, a person with knowledge of the matter says. The draft rules by the Ministry of Transport also say vehicles would be limited to seven seats or less and have global positioning and alarm devices so passengers could alert police if they felt endangered, the source said."

Source: Caxin
China Talk: Interviews, Lectures and Events
What did we learn from China's military parade?

At the Sept. 3 military parade commemorating the 70th anniversary of WWII's end, Beijing unveiled a host of new military hardware, inviting a flurry of speculation from foreign military analysts. To help decode China's military signaling, 21st Century China Program Assistant Director Jude Blanchette recently sat down with GPS Associate Professor Tai Ming Chueng, one of the leading experts on the Chinese military. Click here to launch the audio. 
With this issue of the Briefing, you'll notice that the 21st Century China Program has a new logo, a part of the renaming of the School of Global Policy and Strategy. If you're viewing this message on a mobile device, perhaps you found perusing our briefing a little easier this month, thanks to our new, mobile-friendly template. As with any change, we welcome your comments and kind concerns. Please email your feedback to Until next time, thanks for reading!


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