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Corporate CPC supervision mechanism key to SOE reform: researcher

Xinhua, September 15, 2015 Adjust font size:

Enhancing CPC supervision within state-owned enterprises (SOEs) is crucial to preventing loss of state assets and improving corporate governance, according to a state think tank researcher on Tuesday.

China will improve CPC supervision within SOEs and coordinate CPC supervision with corporate governance, and SOEs should include CPC team-building work in their management, according to the guideline released by the Communist Party of China Central Committee and the State Council last Sunday, promising to push SOEs to become independent market entities.

The combination of CPC supervision and modern corporate governance will better serve the company and public interest, said Zhang Chunxiao, a researcher with the Chinese Academy of Governance, dispelling concerns that enhancing CPC supervision may disrupt company management and market order.

All SOEs in China have CPC branches within the company. The key role of CPC supervision within SOEs is to guard against corruption to avoid loss of state assets, Zhang said.

Corruption was rampant in SOE reform in the 1990s, with managers selling resources for personal gain due to weak corporate CPC supervision.

The board system is the core of modern corporations and has been piloted in 83 of the country's 112 centrally administered SOEs. However, coordination between the board and a company's CPC branch has been tricky.

Zhang pointed out that the two mechanisms can coordinate with each other by defining and sticking to separate responsibilities, with boards in charge of business operations while CPC branches supervise political issues.

The guideline suggested that a single person serve as board chairman and leader of the CPC branch.

This does not indicate autocracy, he said, adding that a board chairman with both management expertise and political consciousness can best serve the company.

Enhancing CPC supervision with SOEs won't compromise the sector's market-oriented efforts, though it will be a difficult balancing act, Zhang said. Enditem