Date
13 November 2018
Comments by PBoC’s Yi Gang (L) and SASAC’s Peng Huagang (R) suggest that Chinese authorities are yet to reach a consensus on the relative roles of private and state enterprises in China’s economy. Pics: Bloomberg
Comments by PBoC’s Yi Gang (L) and SASAC’s Peng Huagang (R) suggest that Chinese authorities are yet to reach a consensus on the relative roles of private and state enterprises in China’s economy. Pics: Bloomberg

Senior Chinese officials divided on ‘competitive neutrality’

Are state-owned enterprises (SOEs) expanding at the expense of the private sector in China? There has been a lot of debate on this issue.

Even top officials seem to have rather different opinions as reflected in the somewhat contradicting comments from the country’s central bank chief and a senior official of the SOE watchdog.

Yi Gang, People’s Bank of China governor, told the G30 International Banking Seminar on Sunday that the central bank will step up internal reform and adopt “competitive neutrality” approach to state-owned firms.

Yi did not elaborate on what “competitive neutrality” refers to, but by linking that with reform and the importance of tackling the structural issues of the economy, some are speculating that Beijing intends to reduce subsidies and support for SOEs and provide a more level-playing field for private firms.

The idea of “competitive neutrality” was first put forward by Australian government in 1990s. It was later promoted by the Paris-based Organization for Economic Cooperation and Development (OECD).

Competitive neutrality is about companies of different ownerships being able to compete fairly through improved transparency in policies, and equitable treatment in areas such as subsidies, taxes, trade instruments and other support mechanisms.

Making sure state-owned and private businesses compete on a level-playing field is believed to be essential for effective use of resources, a critical element for achieving growth and development.

This is the first time Chinese officials have talked about the “competitive neutrality” approach for SOEs.

However, Peng Huagang, deputy secretary general of the State-owned Assets Supervision and Administration Commission (SASAC), the top watchdog for the country’s state industrial companies, said at a press conference in Beijing on Monday that Chinese SOEs shouldn’t be discriminated against.

He stressed that SOEs have already been integrated into China’s “market economy” and that they are already competing on an equal footing with privately owned firms in the market.

His words are quite ironic as Chinese SOEs have always enjoyed an advantage in terms of government support.

It’s understandable that Peng defended SOEs given his position. But such remarks do show that senior officials are yet to reach a consensus in terms of the relative role of private and public ownership in China’s economy.

This article appeared in the Hong Kong Economic Journal on Oct 18

Translation by Julie Zhu

[Chinese version 中文版]

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RC

Hong Kong Economic Journal columnist

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