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Two Types of Companies Should Guard against Five Development Trends


By Zhang Yongwei, Research Team on “Study on Prominent Conflicts in State-owned Enterprise Reform and Countermeasures”, the Enterprise Research Institute, the DRC

Research Report No 196, 2015 (Total NO 4881) 2015-12-29


The two types of companies, namely state-asset investment companies and state-asset operating companies, undertake multiple reform tasks of transforming state asset management mechanisms by prioritizing capital management, reducing excessive administrative intervention, and allowing state capital to boaststrong liquidity. Thus, the establishment and operation of the two types of companies have drawn special attention. The reform requires the companies to guard against the following five development trends. First, we should prevent the present corporate groups from changing into investment and operating companies only by name; we need to make dramatic adjustments to fix the function and business structure of corporate groups. Second, we should prevent state-asset operating companies from being virtualized; we need to clearly define the powers and responsibilities between the two types of companies and the State-owned Assets Supervision and Administration Commission and give full authority to the two types of companies. Third, we need to prevent these companies from going back to administrative organizations and this development trend could be checked through modern corporate governance structure. Fourth, we should prevent the companies from forming larger monopolies or founding one investment company in one industry; we need to encourage distributed shareholding for one SOE by different investment companies. Fifth, we should prevent conflicts with the capital market; we need to operate transparently and disclose information according to the listing standards when the companies are founded.

Key words:two types of companies, corporate governance, flop, suggestions