China chooses 6 SOEs for trial reform plan

BEJING - In a trial aimed at reforming State-Owned Enterprises (SOEs), China’s central government has selected six companies to be given more freedom to choose their own top-level managers, invest, and introduce private capital.

The trial programme will be divided into four areas, one of which gives such companies as State Development & Investment Corp and China National Cereals, Oils and Foodstuffs Corp (COFCO) more power to invest their own assets. Another area will allow such companies as China National Building Group, China National Pharmaceutical Group Corp, China Energy and Conservation and Environmental Protection Group and Xinxing Cathay International Group to appoint their own executives.

Traditionally, top-level executives for SOEs have been selected through government appointment, but this trial reflects a growing desire to establish a compensation system for managers that reflects performance, risk and responsibility in the hope that these companies will become more competitive in the global market.