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State-owned assets 'need to be further capitalized' (2)

By Wang Xiaotian and Chen Jia (China Daily)

09:18, November 29, 2012

In terms of the reform of SOEs, China should pay more attention to the management of public capital for the benefit of its ultimate owners, said Gene Tidrick, a former World Bank senior economist.

About 40 percent of SOEs are still operating at a loss, and there's no evidence that SOEs are good at innovation or efficiency, he said.

The government should make sure that SOEs allocate their dividends timely and provide compensation for their particular public services, instead of intervening directly, according to Tidrick.

Selling non-performing State-owned assets or declaring SOEs running at a loss as bankrupt would be better than integrating dying companies with those performing well, he said.

However, Gao Liang, a former official at the National Development and Reform Commission, said that privatizing SOEs would probably constrain the country's capability for independent technology innovation, as domestic private players are not strong enough and foreign capital would end up playing a major role.

"Some believe that SOEs should be backed up by the government to realize State strategies and maintain economic stability. It's nonsense. Otherwise other major economies would have done the same thing," said Qin Xiao, the council chairman of the Boyuan Foundation, a Hong Kong-registered think tank.

Sheng Hong, director of the Unirule Institute of Economics, said that the reform of China's SOEs could be called a "failure", because policy discrimination against the private sector worsened, and the public can hardly get its dividends.

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