The third plenum traditionally lays out China’s reform and economic strategy for the next five to 10 years, and is often regarded as the most important of the seven party plenums held over the Central Committee’s five-year cycle. It would have usually been held last October or November, but leadership has taken more time to prepare.

At Tuesday’s meeting, Xi reportedly stressed that, to turn more state-owned enterprises (SOEs) into world-class companies, a modern corporate governance structure must be established to solidify the party’s leadership but also promote clear-cut responsibilities and a separation of government functions from corporate operations to foster effective management.

“It is essential to respect businesses as key players in business activities and to tailor modern corporate governance structures to businesses of different ownership nature and of different scales and development stages,” Xi was quoted as saying.

Stressing that SOEs must fulfil their responsibilities to optimise governance, and that the party’s supervision and management of state-owned capital must also be upheld, Xi added that eligible private enterprises should also be encouraged to adopt modern corporate systems.

The comments mark the second time in three weeks that Xi has broached the matter of modern corporate governance. In his rare face-to-face meeting with business leaders at the end of last month – the first of its kind in four years – the president also heard proposals on optimising corporate governance.

Li, with the China Enterprise Reform and Development Society, said that with July’s third plenum focusing on economic reforms, the need to sharpen the competitive edge of SOEs and key private firms will be front and centre.

“Modern corporate governance is key to this endeavour,” he said, explaining that Xi’s message, in a nutshell, is a call for clear ownership structures and equal rights for all shareholders.

Gone are the days when there was debate over whether SOEs needed to have clear ownership structures, explained Li, who is also an adviser with the State-owned Assets Supervision and Administration Commission.

“Xi has stressed that, since many SOEs have gone public or have brought in other shareholders, it’s necessary for [SOEs] to operate like modern listed companies, with clear rights and accountability,” he added.

He explained how it is not uncommon to see, among many listed SOEs, that the party committee within a particular SOE may undermine the role of the firm’s board of directors or “overstep” in day-to-day operations.

“There is also the question of how to define the role and power of state capital in a joint venture, depending on who has the controlling stakes,” he said, pointing to the likelihood that new rules will be introduced at the third plenum to speed up the corporate-governance revamp among SOEs.

Unlike the clear requirements for SOEs, Beijing … only said that some eligible private firms can give it a try

Li Jin, China Enterprise Reform and Development Society

Li added that private businesses, many of which are controlled by families, are also sorely in need of better governance to fend off risks and enhance their competitiveness, but that Beijing has been careful to adopt a softer approach with them.

“There is also no concept of ownership and accountability among private firms run by families, but as they grow in size and have external stakeholders, their governance also needs to be modernised,” he explained.

Li said Beijing’s encouragement of private businesses to overhaul their governance should not be interpreted as interference: “Unlike the clear requirements for SOEs, Beijing … only said that some eligible private firms can give it a try.”

Tuesday’s meeting also stressed the importance of expanding global scientific and technological exchanges to catalyse innovation for an internationalised scientific research environment that will better attract and retain top talent.

Separately, Xi on Wednesday praised Tsinghua University professor Andrew Chi-Chih Yao, 78, an expert in artificial intelligence with degrees from National Taiwan University, Harvard University and the University of Illinois who returned to China 20 years ago and dedicated himself to advancing China technologically.

Xi reportedly expressed hope that Yao would continue to help nurture talent while making “contributions to a high level of self-reliance in technological advancements, and build China into a superpower for education and technology”.