of state-owned capital investment in the energy
industry. Under the new management system, the
border between the government and enterprises
is clearer. As a contributor of state-owned capital, the government is not engaged in managing
asset operations, which is the business of the
enterprises, but in managing capital and continuously optimising the distribution of state-owned
capital by leveraging liquidity and improving the
return on state-owned capital. The reform
addresses three levels:
• the responsibility of government departments
for state-owned enterprise regulations, and
the relationship between the government and
state-owned enterprises, should be optimised;
• the corresponding internal reform of
state-owned enterprises should be deepened;
and
• government should delegate some management and investment powers to state-owned
enterprises, which in effect means decentralising some power. Specifically, for
state-owned energy enterprises, the government should optimise the distribution of
state-owned capital in the energy industry
through guarantees of state-owned capital for
key and strong sectors and withdrawal from
inefficient areas to improve the return on
capital.
As part of the reform of the state-owned
capital management system, state-owned energy
enterprises need to carry out internal reforms,
such as reorganising themselves into state-owned
capital investment companies, establishing a
modern enterprise system with internal mechanisms and opening up to mixed ownership. The
necessity of reorganising state-owned energy
enterprises into state-owned capital investment
companies should proceed on a case-by-case
basis. In the reform pilot of turning central
government-administered state-owned enterprises into state-owned capital investment companies, only two energy enterprises (SDIC and
Shenhua Group) are involved. For those
state-owned energy enterprises that transition
into state-owned capital investment companies,
their internal systems and mechanisms should be
reformed in accordance with the new
state-owned asset management system. The reason for this is that the goal of the reform of the
state-owned capital management system is to
improve the return on investment of state-owned
capital. The mixed ownership system reform
pilot involves CNPC, Sinopec and central
government-administered state-owned enterprises in the power industry.
9.4.2 State-Owned Energy Enterprises
Should Become Bigger
and Stronger
Making state-owned energy enterprises bigger
and stronger is a realistic requirement for
national energy security and social stability.
China is a major energy consumer, working in
close cooperation with the global supply market
in the three major fossil energy areas: oil, natural
gas and coal. It should be emphasised that energy
supply is not only an economic issue but also a
social responsibility. First, state-owned energy
enterprises shoulder the social responsibility of
ensuring energy supply. Second, since
state-owned energy enterprises have large
workforces and the areas where they are located
are often endowed with energy resources, they
shoulder the social responsibility of stabilising
employment and promoting regional industrial
restructuring. Bearing this dual (economic and
social) responsibility, state-owned energy enterprises need to become bigger and stronger.
Through years of development, they have laid a
good foundation for growing bigger and
stronger.
Growing stronger comes before growing bigger, which suggests that the former is harder.
State-owned energy enterprises have already
been big, but this does not mean they are strong.
Generally, they are subject to heavy historical
burdens, high interest rates on debt, poor use of
resources and low profit margins. Improving
return on investment of state-owned capital in the
588
S. Yaodong and A. Gillespie
industry. Under the new management system, the
border between the government and enterprises
is clearer. As a contributor of state-owned capital, the government is not engaged in managing
asset operations, which is the business of the
enterprises, but in managing capital and continuously optimising the distribution of state-owned
capital by leveraging liquidity and improving the
return on state-owned capital. The reform
addresses three levels:
• the responsibility of government departments
for state-owned enterprise regulations, and
the relationship between the government and
state-owned enterprises, should be optimised;
• the corresponding internal reform of
state-owned enterprises should be deepened;
and
• government should delegate some management and investment powers to state-owned
enterprises, which in effect means decentralising some power. Specifically, for
state-owned energy enterprises, the government should optimise the distribution of
state-owned capital in the energy industry
through guarantees of state-owned capital for
key and strong sectors and withdrawal from
inefficient areas to improve the return on
capital.
As part of the reform of the state-owned
capital management system, state-owned energy
enterprises need to carry out internal reforms,
such as reorganising themselves into state-owned
capital investment companies, establishing a
modern enterprise system with internal mechanisms and opening up to mixed ownership. The
necessity of reorganising state-owned energy
enterprises into state-owned capital investment
companies should proceed on a case-by-case
basis. In the reform pilot of turning central
government-administered state-owned enterprises into state-owned capital investment companies, only two energy enterprises (SDIC and
Shenhua Group) are involved. For those
state-owned energy enterprises that transition
into state-owned capital investment companies,
their internal systems and mechanisms should be
reformed in accordance with the new
state-owned asset management system. The reason for this is that the goal of the reform of the
state-owned capital management system is to
improve the return on investment of state-owned
capital. The mixed ownership system reform
pilot involves CNPC, Sinopec and central
government-administered state-owned enterprises in the power industry.
9.4.2 State-Owned Energy Enterprises
Should Become Bigger
and Stronger
Making state-owned energy enterprises bigger
and stronger is a realistic requirement for
national energy security and social stability.
China is a major energy consumer, working in
close cooperation with the global supply market
in the three major fossil energy areas: oil, natural
gas and coal. It should be emphasised that energy
supply is not only an economic issue but also a
social responsibility. First, state-owned energy
enterprises shoulder the social responsibility of
ensuring energy supply. Second, since
state-owned energy enterprises have large
workforces and the areas where they are located
are often endowed with energy resources, they
shoulder the social responsibility of stabilising
employment and promoting regional industrial
restructuring. Bearing this dual (economic and
social) responsibility, state-owned energy enterprises need to become bigger and stronger.
Through years of development, they have laid a
good foundation for growing bigger and
stronger.
Growing stronger comes before growing bigger, which suggests that the former is harder.
State-owned energy enterprises have already
been big, but this does not mean they are strong.
Generally, they are subject to heavy historical
burdens, high interest rates on debt, poor use of
resources and low profit margins. Improving
return on investment of state-owned capital in the
588
S. Yaodong and A. Gillespie