President Xi Jinping called for a stronger state presence in the energy and railway sectors to safeguard national security on Tuesday, a shift from previous emphasis on the need for market-oriented restructuring.
These “natural monopolies”, already controlled by state players, will be a priority destination for the investment of state capital, Xi said at a meeting of the Central Commission for Comprehensively Deepening Reform.
State-controlled capital funds, he added, should concentrate on industries which matter most to national security – those that serve as the “backbone” of the national economy, public services, emergency areas “key to people’s livelihoods” as well as sectors of strategic importance.
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“Enterprises in the natural monopoly links should focus on their main responsibilities, and state investment in basic infrastructure should be increased for their safety and reliability,” Xi was quoted as saying in the official Chinese readout.
The Chinese leader also stressed intensified supervision to prevent state players from abusing their near-monopoly status in areas where competition is allowed.
“Natural monopoly sectors should separate their basic networks from operations according to their actual conditions, and open up competitive businesses to the market,” he said.
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Energy, railways, telecoms and public utilities were specifically encouraged to serve as the vanguard of Beijing’s market-oriented reforms of state-owned enterprises (SOEs) in the 2021-2025 development plan.
The work report from March 2021 also vowed to permit “all manufacturers to participate in the electricity trade”, a pledge made in line with the government’s push to establish a competitive electricity market by separating ownership of electricity grids from the electricity trade.
Reform of SOEs has been an endeavour decades in the making, intended to reverse a perception of heavy debt, low efficiency and near loss-making levels of profitability.
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The proportion of state-owned assets has been on the rise, giving credence to those fears. Last year their cumulative value ballooned to 339.5 trillion yuan (US$46.6 trillion), a 10.1 per cent increase from a year earlier according to an October report from the State Council, China’s cabinet.
The seemingly preferential treatment afforded to SOEs has also been a sore point in economic negotiations with foreign governments, fuelling accusations of unfair competition.
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The State-owned Assets Supervision and Administration Commission, which oversees more than 90 state giants such as China Mobile and China National Petroleum Corporation, vowed to allocate financial support to “strategic, core and weak” state-owned sectors.
It gave particular emphasis to “science and tech innovation, especially in developing breakthroughs in key technologies”, according to an online statement released on Tuesday.