· Area of Law： Enterprises

· Level of Authority： Group Provisions

· Date issued：08-24-2015

· Effective Date：08-24-2015

· Status： Effective

· Issuing Authority： Central Committee of the Communist Party of China State Council

Guiding Opinions of the CPC Central Committee and the State Council on Deepening the Reform of State-owned Enterprises
（Aug 24, 2015）
State-owned enterprises ("SOE") belong to the people. They represent an important force to promote China's modernization and safeguard the common interests of the people, and are the vital material basis and political foundation for the development of Party and national undertakings. Since the launch of the reform and opening-up initiative, the reform and development of SOEs have witnessed constant significant progresses. As a result, SOEs whose operating quality and efficiency have improved significantly have integrated with the market economy on the whole, and a number of leading enterprises with core competitiveness has emerged during competition on both the international and the domestic markets, making major contribution to promote economic and social development, protect and improve people's livelihood, explore the international market and sharpen China's comprehensive strength. In addition, most SOEs have quality operational and managerial teams, and the majority of their workers have been making unremitting efforts. In short, the achievements made by SOEs are outstanding. Nevertheless, it shall be noted that there are still some acute contradictions and problems that SOEs need to address urgently. The role of some enterprises as market players has not been truly established, their modern enterprise systems are not sound enough, their State-owned assets regulation frameworks leave much to be desired, and their State-owned capital operating efficiency needs to be further raised. Some enterprises are plagued by chaotic management and protruding issues such as control by insiders, transfer of benefits, loss of State-owned assets, etc., and issues of enterprises running ventures that can and should be assumed by social players and issues left over by past practices have not yet been fully resolved. Some other enterprises fail to enforce the duties of their Party organizations to manage and govern Party affairs and discipline, weakening the role of Party organizations. Going forward, SOEs face increasingly fierce international competition and the great challenge of transformation and upgrading. In addition, SOEs shoulder significant historical missions and responsibilities in promoting China's economy to maintain growth at medium to high speed and move towards mid-to-high end, fine-tuning and developing the socialist system with Chinese characteristics, and achieving the Chinese dream of the great rejuvenation of the Chinese nation. As such, it is a must to conscientiously implement the strategic decisions by the CPC Central Committee and the State Council, continue to push forward SOE reform in a problem-oriented manner according to the requirements of the "four comprehensive" strategic layout (i.e. developing a moderately well-off society, deepening reform, governing the country by rule of law, and tightening Party discipline in a comprehensive manner) and by taking economic development as the central task, effectively get rid of structural and institutional obstacles, and make unwavering efforts to develop stronger, better and larger SOEs. To this end, these Guiding Opinions are hereby put forward as follows:
1. General requirements
(1) Guiding thoughts.
It is imperative to hold high the great banner of socialism with Chinese characteristics, conscientiously enforce the requirements laid down at the 18th National Congress of the CPC and the Third and the Fourth Plenary Sessions of the 18th Central Committee of the CPC, study and enforce the series of important speeches given by General Secretary Xi Jinping in an in-depth manner, stick to and improve the basic economic system, adhere to the direction of socialist market economic reform, adapt to the new market-oriented trend of modernization and internationalization, improve the modern enterprise system that is characterized by clear property rights, well-defined powers and responsibilities, separation between government and business, and scientific management according to the standards of liberating and developing social productivity, and by centering around the core missions of raising the efficiency of State-owned capital and enhancing the vitality of SOEs, fine-tune the State-owned assets regulation framework to prevent the loss of State-owned assets, make comprehensive progress of managing and governing enterprises by the rule of law, strengthen and improve the Party's leadership over SOEs, develop stronger, better and larger SOEs, constantly enhance the vitality, controlling power, influence and the ability to withstand risks of the State-owned economic sector, and let SOEs proactively adapt to and lead the "new normal" of economic development, thus actively contributing to promote the sustained and healthy development of the economy and the society at large, and realize the Chinese dream of the great rejuvenation of the Chinese nation.
(2) Basic principles
-- The basic economic system shall be upheld and improved. This is the fundamental requirement that must be adhered to in deepening SOE reform. It is a must to unswervingly consolidate and develop the sector of public economy, steadfastly encourage, support and guide the development of the non-public economic sector, uphold the dominance of the sector of public economy, play the leading role of the State-owned economic sector, actively promote the cross-shareholding and mutual integration of State-owned capital, collectively-owned capital, non-public capital, etc., and push capitals of various ownership types to complement each other so as to achieve mutual progress and common development.
-- The direction of socialist market economic reform shall be adhered to. This is the basic rule that must be followed in deepening SOE reform. During the reform of SOEs, it is important to follow the rules and laws of market economy and enterprise development, make unwavering efforts to separate government from business, government from capital, and ownership from the right to business operations, uphold the unity of rights, obligations and responsibilities, and always combine incentive mechanisms and restraint mechanisms so as to promote SOEs to become independent market players in the true sense where they engage in autonomous operations, make profits and assume losses independently, bear risks on their own, practice self-discipline and pursue self-development pursuant to the law. SOEs under the socialist market economy shall be role models for conscientiously performing social responsibilities.
-- The principle of combining the efforts to enhance vitality and those to reinforce regulation shall be upheld. This is the important relationship that must be grasped in deepening SOE reform. Enhancing vitality is the essential requirement for effectively running SOEs while strengthening regulation is an important safeguard for the same purpose. As such, the organic unity thereof shall be effectively ensured. It is vital to continue making progress of streamlining policies and delegating authority, enforce the property rights of enterprise legal persons and their rights to engage in autonomous operations in accordance with the law, and further stimulate the vitality, creativity and market competitiveness of enterprises. On the other hand, efforts shall be made to further improve the SOE regulatory system, effectively prevent the loss of State-owned assets and ensure the preservation and appreciation of the value of State-owned assets.
-- The Party's leadership over SOEs shall be upheld. This is the political direction and principle that must be held fast to in deepening SOE reform. It is critical to enforce the guidelines of comprehensively tightening Party discipline, give full play to the core political role of the Party organizations of enterprises, build up the leadership teams of enterprises, innovate grass-roots Party building work, carry out the campaign to build clean Party governance in an in-depth manner, continue to wholeheartedly rely on the working class, and safeguard the legitimate rights and interests of workers, so as to provide strong political, organizational and talent guarantee and support for the reform and development of SOEs.
-- The reform of SOEs shall always proceed in an active, steady and coordinated manner. This is the scientific approach that must be adopted in deepening SOE reform. It is essential to correctly handle the relationship between promoting reform and upholding the rule of law, the relationship between reform, development and stability, and the relationship between making proper top-level designs and respecting grass-roots initiatives, highlight the problem-oriented approach, adhere to making progress in a classified manner, and properly grasp the order, rhythm and intensity of reforms, so as to ensure solid progress and practical results of reforms.
(3) Main objectives.
The following main objectives shall be achieved by 2020: to make decisive achievements in the key fields and aspects of SOE reform; to form a State-owned asset management system, a modern enterprise system and a market-oriented business operation mechanism that are more in line with China's basic economic system and the requirements on the development of socialist market economy; to develop a more reasonable layout and structure for State-owned capital; to nurture a large number of outstanding entrepreneurs of upright character who are capable, competent at operations and vibrant; to develop a legion of key SOEs with innovation capability and international competitiveness; and, to significantly enhance the vitality, controlling power, influence and the ability to withstand risks of the State-owned economic sector.
-- The corporate-style reform of SOEs shall be largely completed. The following objectives shall be achieved in this regard; to make positive progress in developing the mixed ownership economy; to perfect the corporate governance structure; and, to fine-tune the market-oriented mechanisms featuring the survival of the fittest under which SOEs engage in autonomous and flexible business operations, and promote and demote internal management personnel, employ and let go staff members, and increase and cut remunerations according to market practices.
-- The State-owned asset regulation framework shall become more mature, with relevant laws and regulations that are more robust, regulatory means and methods that are continuously optimized, and regulatory operations that are more scientific, targeted and effective. For-profit State-owned assets shall be placed under centralized and unified regulation, and the responsibilities for preserving and increasing the value of State-owned assets shall be fully assigned to the parties concerned.
-- The efficiency for the allocation of State-owned capital shall be significantly raised, and the layout and structure of State-owned economy shall be continuously optimized to effectively play its leading role. SOEs shall fully display their leading and exemplary role in enhancing the capability of independent innovation, protecting resources and the environment, accelerating transformation and upgrading, and performing social responsibilities.
-- The Party building of enterprises shall be comprehensively strengthened, and their anti-corruption frameworks and work systems shall become more robust. In addition, the Party organizations of SOEs shall enjoy a more solid statutory position in corporate governance, and fully display their core political role.
2. The reform of SOEs shall be pushed forward in a classified manner.
(4) SOEs shall be divided into different categories. According to the strategic positioning and development goals of State-owned capital, and in light of the role of different SOEs in economic and social development, as well as their current situations and development needs, SOEs shall be divided into commercial SOEs and SOEs in public welfare nature. By defining the functions and dividing the categories of SOEs, it is important to practice classified reform, development, regulation, responsibility determination and assessment, improve the relevance of reform, the effectiveness of regulation and the scientific level of assessment and appraisal, promote SOEs to deepen integration with the market economy, and facilitate the organic unity of the economic and social benefits of SOEs. According to the principle of whoever contributes the capital shall be responsible for classification, an agency that performs the duties of capital contributors shall be responsible for formulating the scheme for defining the functions and classifying the category of an invested enterprise, and shall report the same to the government at the corresponding level for approval. All regions may, in light of their respective realities, divide and dynamically adjust the categories of the functions of SOEs in their respective regions.
(5) The reform of commercial SOEs shall be pushed forward. Commercial SOEs shall engage in commercial operations in accordance with market requirements, and independently carry out production and business activities pursuant to the law primarily for the purposes of enhancing the vitality of the State-owned economic sector, amplifying the functions of State-owned capital, and preserving and increasing the value of State-owned assets, so as to achieve the survival of the fittest and orderly market entry and exit.
In principle, all commercial SOEs whose core business belongs to industries and fields of sufficient competition shall implement corporate-style shareholding reform, actively attract other State-owned capital or various types of non-State-owned capital to diversify equity, adopt flexible approaches where State-owned capital may be the absolute or relative controlling shareholder, or be merely a shareholder, and focus efforts on promoting their listings as a whole. The assessment of SOEs of this type shall focus on business performance indicators, the preservation and appreciation of the value of State-owned assets and market competitiveness.
Commercial SOEs whose core business belongs to major industries and key fields concerning national security or national economic lifeline, or that are mainly responsible for major special project tasks shall maintain the position of State-owned capital as the controlling shareholder, while support non-State-owned capital to become shareholders. In industries of natural monopoly, reform focusing on aspects of separating government from business, separating government from capital, promoting franchise operations and strengthening government regulation shall be carried out, and efforts shall also be made to separate infrastructure networks from network operations and liberalize competitive business depending on the characteristics of different industries, and promote market-oriented allocation of public resources. Where certain enterprises need to be wholly owned by State-owned capital, efforts shall still be made to actively attract other State-owned capital to diversify equity. Special business segments shall be effectively separated from competitive business segments, and be independently run and accounted for. The assessment of such SOEs shall not only cover their business performance indicators and the preservation and appreciation of the value of their State-owned assets, but also focus on aspects such as their efforts to serve national strategies, safeguard national security and the operation of the national economy, develop cutting-edge strategic industries and complete special tasks.
(6) The reform of SOEs in public welfare nature shall be pushed forward. SOEs in public welfare nature shall introduce market mechanisms, and raise the efficiency and capabilities of public service primarily for the purposes of protecting people's livelihood, serving the society at large, and providing public goods and services. Enterprises of this type may be wholly State-owned, while those whose conditions permit may also promote investor diversification. In addition, non-State-owned enterprises may also be encouraged to participate in the operations of such enterprises by purchase of services, franchise operations, entrustment and agency, etc. The assessment of SOEs in public welfare nature shall focus on cost control, product and service quality, operating efficiency and support capabilities, while their business performance indicators and the preservation and appreciation of the value of their State-owned assets shall be assessed in a differentiated manner according to different characteristics of such enterprises. Public evaluation shall be included in such assessment.
3. The modern enterprise system shall be improved.
(7) The corporate-style shareholding system reform shall be pushed forward. It is important to step up corporate-style reform at the group level, actively introduce various types of investors to achieve equity diversification, vigorously promote the restructuring and listing of SOEs, and create conditions to list group companies as a whole. According to the functions of different enterprises, efforts shall be made to gradually adjust the percentage of State-owned equity, and form an operating mechanism featuring diversified equity structures, standard shareholder behavior, effective internal restraints, and efficient and flexible operations. Some of the State-owned capital shall be allowed to be converted into preference shares, and a system of shares subject to special State management shall be explored in a few specific fields.
(8) The corporate governance structure shall be fine-tuned. The focuses in this aspect are to promote the development of a SOE's board of directors, establish and improve the decision implementation and supervision mechanism of coordinated operation and effective checks and balances where powers match responsibilities, regulate the acts of the chairman of the board of directors and the general manager to exercise powers, give full play to the decision-making role of the board of directors, the supervisory role of the board of supervisors, the operation and management role of the management, and the core political role of the Party organization of a SOE, and effectively resolve the phenomenon where the boards of directors of certain enterprises exist only in name and decisions are solely made by top leaders, so as to achieve standardized corporate governance. In addition, it is vital to effectively enforce and safeguard the lawful exercise of the rights to make material decisions, select and appoint personnel, distribute remunerations, etc. by the board of directors, and guarantee the operational autonomy of the management. No government department and agency may intervene unless authorized by law.
The internal checks and balances of a SOE's board of directors shall be strengthened. Both the board of directors and the board of supervisors of a wholly State-owned company shall have employee representatives, and external directors shall account for the majority of board members. The voting method of "one director, one vote" shall be enforced, and directors shall be responsible for the resolutions of the board of directors. The appraisal methods for the board of directors and directors shall be fine-tuned, and the assessment, appraisal and management of directors shall be reinforced so that directors who are directly responsible for major decision-making blunders shall be promptly replaced or dismissed, and be held accountable pursuant to the law. In addition, more efforts shall be made to build up the team of external directors, and broaden their sources.
(9) A classified and hierarchical management framework shall be established for SOE leaders. It is important to combine the principle of Party management of cadres with the requirements that the board of directors of a SOE shall be selected pursuant to the law, that the board of directors shall select persons in charge of operations and management in accordance with the law, and that such persons shall exercise the power to recruit and appoint staff pursuant to the law, and constantly innovate effective realization forms. Superior Party organizations and State-owned assets regulatory authorities shall strengthen the management of SOE leaders according to their respective scope of management, broaden the channels for personnel recommendation, assess and nominate candidates in accordance with applicable provisions, and go through selection and appointment procedures strictly as required. Depending on the different categories and levels of enterprises, different personnel selection and appointment methods, such as by election, by appointment, by recruitment, etc. shall be adopted. Efforts shall be made to push forward the professional manager system, combine internal grooming with external hiring, and smoothen the channels for conversion between existing persons in charge of operations and management and professional managers. The board of directors of a SOE shall select, appoint and manage professional managers in a market-oriented manner, reasonably increase the percentage of professional managers selected and appointed according to market practices, and accelerate the establishment of an exit mechanism. It is also necessary to push for the management of enterprise management members based on their terms of office and contracts, specify their responsibilities, rights and obligations, and tighten the management of term of office and the assessment of targets.
(10) An enterprise remuneration distribution system suitable for the socialist market economy shall be implemented. The right of an enterprise to internally distribute remunerations is one of its statutory rights, and such distribution shall be determined by the enterprise independently pursuant to laws and regulations. It is required to improve the distribution mechanism that has both incentives and restraints, that emphasizes on both efficiency and fairness, and that is both in line with the general patterns of enterprises and suitable for the characteristics of SOEs. It is essential to establish and improve a wage determination and normal increment mechanism that largely satisfies the conditions of the labor market, and is linked to the economic performance of enterprises and labor productivity; promote performance appraisal of all staff members, conduct scientific and performance-oriented evaluation of the contributions by employees on different positions, reasonably widen the gap of income distribution, and make sure that incomes can be increased and cut to clearly reflect rewards and punishments, thus fully mobilizing the enthusiasm of all workers. SOE leaders shall be subject to differentiated remuneration distribution measures that match the approaches of personnel selection and appointment, are suitable for the functions and nature of enterprises, and are pegged to business performance. The basic annual salary, annual performance-based salary and term-of-office incentive pay shall be reasonably determined for SOE leaders appointed by the CPC Central Committee, the State Council, local Party committees and governments, and their departments. A market-based remuneration distribution mechanism shall be applied to professional managers engaged according to market practices, while a variety of means may be employed to explore the improvement of mid-to-long-term incentive mechanisms. Restraint mechanisms symmetrical to incentive mechanisms shall be improved, such as those for conducting economic responsibility audit of SOE leaders, requiring SOE leaders to disclose information, deferring bonus payments to SOE leaders, and exercising recourse to recover the remunerations already paid to SOE leaders under certain circumstances. Moreover, it is vital to strictly standardize the treatment for performance of duties by SOE leaders and the expenses incurred thereby for business purposes, and strictly prohibit them from using public funds for personal expenditure.
(11) Reform shall be deepened with regard to the internal human resources systems of enterprises. It is required to establish and improve the systems for the open recruitment, competitive position-taking, etc. of all types of management personnel of enterprises, allow special management personnel to be selected by means such as recommendation by talent agencies upon entrustment, and broaden the vision and channels for personnel selection and appointment; establish a classified and hierarchical system for market-oriented open recruitment of enterprise employees, and ensure the public disclosure of recruitment information, processes and outcomes; build harmonious labor relations, and standardize the management of various types of employment by enterprises pursuant to the law; and, establish and improve a market-oriented employment system whose core is contract management and whose basis is position management, and form a true mechanism of reasonable mobility where enterprises can promote and demote various types of management personnel, and can hire and let go staff members according to market conditions.
4. The State-owned asset management system shall be improved.
(12) State-owned asset regulatory authorities shall be pushed to transform their functions mainly through capital-focused regulation.
State-owned asset regulatory authorities shall have an accurate understanding of their role for performing the duties of capital contributors pursuant to the law, scientifically define the boundaries for regulation of State-owned asset capital contributors, formulate lists of regulatory powers and responsibilities, and shift from enterprise-focused regulation to capital-focused regulation. The said authorities shall scientifically regulate all aspects that shall be regulated, ensure there is no blind spot, and focus regulation on the layout of State-owned capital and the efforts made to standardize capital operation, raise capital return and safeguard capital security. On the other hand, such authorities shall delegate authority pursuant to the law and refrain from stepping beyond their authority to regulate aspects that shall be deregulated. Specifically, enterprises shall take back matters subject to their independent business and management decision-making pursuant to the law, management matters extended to subsidiaries shall, in principle, fall under the management scope of tier-one enterprises, and public administration functions that State-owned asset regulatory authorities assume in support of relevant government departments and entities shall be returned to the latter. It is also necessary to vigorously promote law-based regulation, focus on innovating regulatory approaches and means, change the style of administrative management, fine-tune appraisal systems and methods, and make regulation more scientific and effective.
(13) The State-owned capital authorized operation system shall be reformed mainly through capital management. It is crucial to go through restructuring to form State-owned capital investment and operating companies, explore effective operating models, rely on investment and financing, industry nurturing and capital integration to promote industrial agglomeration, transformation and upgrading, and optimize the layout and structure of State-owned capital; and, promote the rational flow of State-owned capita through equity operation, value management and orderly market entry and exit, so as to preserve and increase the value of State-owned assets. The boundaries of the ownership and the operating rights of State-owned capital shall be scientifically defined. State-owned asset regulatory authorities shall, pursuant to the law, perform the duties of capital contributors with regard to State-owned capital investment and operating companies, as well as other enterprises under their direct regulation, and authorize State-owned capital investment and operating companies to perform the duties of capital contributors as regards State-owned capital within the scope of authorization. State-owned capital investment and operating companies, as professional platforms for the market operation of State-owned capital, shall engage in independent operations of State-owned capital pursuant to the law, perform shareholder responsibilities with regard to invested enterprises, and effectively assume the responsibilities for preserving and increasing the value of State-owned assets in accordance with the principle of matching powers and responsibilities. A pilot scheme shall be launched to let governments directly authorize State-owned capital investment and operating companies to fulfill their duties as capital contributors.
(14) The rational flow and optimal allocation of State-owned capital shall be promoted mainly through capital management.
It is paramount to optimize the layout and structure of State-owned capital, and enhance the overall functionality and efficiency of the State-owned economic sector by sticking to market-oriented approaches, treating enterprises as dominant players, and making careful considerations of the actions that shall or shall not be taken; optimize the key investment directions and fields for State-owned capital by closely centering around the missions of serving national strategies, and enforcing State industrial policies and the general requirements of adjusting the layout of key industries, and push State-owned capital to gravitate towards important sectors and key fields concerning national security, national economic lifeline and people's livelihood, key infrastructure, forward-looking strategic industries and enterprises with core competitive edges; display the role of State-owned capital investment and operating companies, clean up and engineer the market exit of a number of SOEs, reorganize and integrate a number of SOEs, and innovate the development of a number of SOEs; establish and improve the market-oriented exit mechanism featuring the survival of the fittest, give full play to the role of unemployment benefits, re-employment training, etc., properly address the issues of employee placement, effectively ensure enterprises that exit the market close down or file for bankruptcy pursuant to the law, expedite the disposal of inefficient and non-performing assets, and eliminate obsolete production capacity; support enterprises to dispose of their assets at fair market prices via securities exchanges, equity exchanges and other capital markets in compliance with laws and regulations, transform the forms of State-owned capital, and use State-owned capital that has been converted into cash for fields and industries with greater needs; push SOEs to accelerate management and business model innovation, limit the tiers of legal persons in a reasonable manner, and effectively compress management hierarchies; display the key and exemplary role of SOEs during the implementation of the innovation-driven development strategy and the strategy of developing China into a manufacturing powerhouse, reinforce the position of enterprises as the main players for technological innovation, and attach importance to the grooming of scientific research talents and highly skilled talents; and, support SOEs to engage in international operations, encourage SOEs to take capital as the link to form powerful alliances with, and complement the advantages of, other SOEs and enterprises of other ownership types, and accelerate the development of a number of world-class multinational companies.
(15) Centralized and unified regulation of for-profit State-owned assets shall be promoted mainly through capital management. It is required to steadily include the State-owned capital of enterprises belonging to Party and government organs, as well as public institutions to the system for centralized and unified regulation of for-profit State-owned assets, and include those whose conditions permit under the management of State-owned capital investment and operating companies; strengthen the fundamental management of State-owned assets, and lose no time in formulating the regulations on the fundamental management of the State-owned assets of enterprises in accordance with the principle of unifying institutions, rules and work systems; establish a State-owned capital operating budgetary management system that covers all SOEs and features hierarchical management, raise the percentage of the proceeds on State-owned capital that shall be turned over to the public finance to 30% by 2020, and use more of such proceeds for supporting and improving people's livelihood; and, transfer some State-owned capital to beef up social security funds.
5. Mixed ownership economy shall be developed.
(16) The mixed ownership reform of SOEs shall be pushed forward. SOEs shall be steadily pushed to develop mixed ownership economy with a view to promoting them to change operating mechanisms, amplifying the functions of State-owned capital, raising the allocation and operating efficiency of State-owned capital, and achieving complementary, mutual and common progress and development of capital of a variety of ownership types. As regards SOEs that have adopted mixed ownership by taking the joint stock form, going public or other means, efforts shall be focused on improving the modern enterprise system and raising the capital operation efficiency. As regards SOEs for which the continued promotion of the mixed ownership reform is suitable, efforts shall be made to give full play to the role of market mechanisms, always implement policies depending on different regions, industries and enterprises, let State-owned capital play the role of the sole investor, the controlling shareholder or merely a shareholder wherever suitable, refrain from "match-making", applying the same policy to all SOEs and setting specific timelines, and promote the progress of one SOE only when conditions are ripe. Furthermore, it is necessary to carry out reform pursuant to laws and regulations, in strict accordance with the prescribed procedures, and in an open and impartial manner, effectively protect the property rights and interests of all types of capital contributors to mixed ownership enterprises, and strictly prevent the loss of State-owned assets.
(17) Non-State-owned capital shall be introduced to participate in SOE reform. Investors with non-State-owned capital shall be encouraged to participate in the restructuring and reorganization of SOEs, the capital increase of State-controlled listed companies and the operations and management of enterprises through share purchase, equity acquisition, convertible bond subscription, equity replacement and other various means. Equal rights shall be given to holders of the same type of equity to effectively safeguard the legitimate rights and interests of shareholders of various types. Projects that are in line with industrial policies and conducive to transformation and upgrading shall be open to non-State-owned capital in fields such as oil, natural gas, electricity, railway, telecommunications, resources development, public utilities, etc. Moreover, it is important to improve the foreign investment security review mechanism in accordance with the Catalogue for the Guidance of Foreign Investment Industries and relevant security review provisions, carry out various types of pilot projects of public-private partnership ("PPP"), and gradually popularize the PPP model.
(18) State-owned capital shall be encouraged to invest in non-State-owned enterprises by various means. It is required to give full play to the role of State-owned capital investment and operating companies as the platforms for capital operation, adopt market-oriented means to make equity investment in non-State-owned enterprises with strong development and growth potential in key fields such as public services, high-end technology, ecological and environmental protection and strategic industries, and encourage SOEs to engage in equity integration, strategic cooperation and resources integration with non-State-owned enterprises through share purchase, joint investment, reorganization and various other means.
(19) Efforts shall be made to explore employee stock ownership in mixed ownership enterprises. It is important to launch pilot projects first, push for steady and orderly progress after gaining experience, and establish a long-term incentive and restraint mechanism through employee stock ownership; and, support restructured scientific research institutes, high-tech enterprises and enterprises mainly providing science and technology services in which human capital and technical elements make larger contribution to launch pilot employee stock ownership schemes on a priority basis, and support scientific researchers, operations and management personnel, key business personnel, etc. who have a direct or material impact on the business performance and sustained development of their enterprises to hold enterprise shares.
An enterprise shall let employees hold its shares mainly by increasing its share capital, investing in the establishment of a new entity, etc. In addition, it is imperative to fine-tune relevant policies, improve review procedures, standardize operating processes, conduct rigorous asset valuation, and establish and improve equity transfer and exit mechanisms, so as to ensure the openness and transparency of employee stock ownership, strictly prohibit covert operations, and prevent transfer of benefits.
6. Regulation shall be reinforced to prevent the loss of State-owned assets.
(20) Enterprises shall reinforce their internal regulation. It is vital to improve the internal regulation system of an enterprise, specify the supervisory responsibilities of its board of supervisors and departments of audit, disciplinary inspection and supervision, tour inspection, legal affairs, finance, etc., perfect the supervision system and step up the efforts of enforcement; reinforce the supervision of departments and positions where power, capital, resources or assets concentrate, enforce the rules that powers shall be exercised based on different matters, granted to different positions and authorized according to different levels, practice regular job rotation, and reinforce internal process control to prevent the abuse of power; establish a work mechanism where the audit department of an enterprise shall be accountable to its board of directors; ensure that the internal board of supervisors of an enterprise effectively regulate directors, managers and other senior management personnel; further play the role of an enterprise's general counsel to conduct legal review and control during business operations and management, and promote enterprises to carry out business operations and management in compliance with the law; require group companies to strengthen the management and supervision of their subsidiaries pursuant to laws and regulations and with due diligence; and, vigorously promote the public disclosure of enterprise affairs, improve the enterprise democratic management system whose basic form is the general meeting of employee representatives, and enhance democratic oversight of enterprises by their employees.
(21) An efficient and coordinated mechanism for external oversight shall be established and improved. It is essential to reinforce capital contributor supervision, speed up the formulation of laws and regulations concerning the code of conduct of SOEs, strengthen the supervision of the key business of enterprises, the focuses of reform, the important aspects for the operation of State-owned capital and overseas State-owned assets, standardize operating processes, reinforce professional inspection, and allow the agencies that perform the duties of capital contributors to appoint the chief accountants of enterprises on a pilot basis; strengthen and improve the system of the external board of supervisors, specify its duties, reinforce its cooperation with relevant professional supervisory agencies, strengthen current and interim supervision, beef up the application of supervision achievements, and establish and improve verification, transfer and rectification mechanisms; improve the State-owned capital audit supervision framework and system, put all the State-owned assets of an enterprise under audit regulation, and establish a system for regular audit of the State-owned capital of enterprises; strengthen disciplinary inspection and supervision, as well as tour inspection work, reinforce the supervision over enterprise leaders of their clean and honest conducts and exercise of power, step up efforts to investigate and deal with major and important cases, and focus on effectively rectifying existing problems; integrate various forces of supervision including capital contributor regulation, regulation and audit by external boards of supervisors, disciplinary inspection and supervision, tour inspection, etc., establish a supervision work consultation mechanism, enhance coordination, innovate methods, share resources, reduce duplicated inspection, and raise supervision effectiveness; and, establish and improve a supervision opinion feedback and rectification mechanism to form a closed loop for supervision work.
(22) Information shall be disclosed to strengthen public oversight. It is crucial to improve the State-owned asset and SOE information disclosure system, establish unified online information disclosure platforms, disclose the overall operation and regulation of State-owned capital, the corporate governance and management structure of SOEs, their operating conditions, financial positions and affiliated-party transactions, the remunerations of their leaders, etc. pursuant to laws and regulations and in a timely and accurate manner, and develop SOEs with transparent operations; earnestly deal with people's letters, visits and complaints concerning the loss of State-owned assets and other issues, and promptly respond to public concerns; and, give full play to the media's role of public opinion supervision, and effectively safeguard the rights of the public to obtain information on, and supervise, the operations of the State-owned assets of enterprises.
(23) Accountability shall be strictly pursued. It is vital to establish and improve the system to trace and investigate the liabilities for major decision-making blunders, dereliction of duty and malfeasance in SOEs, as well as supporting systems such as those for assessing major decision-making, recording the performance of major decisions, formulating the standards on determining decision-making mistakes, etc., severely investigate and punish acts of encroaching on, embezzling, transferring and squandering State-owned assets and evading financial debts; and, establish and improve the supervision and accountability mechanism for the State-owned assets of enterprises, sternly pursue the liabilities of relevant personnel in terms of dereliction of duty or malfeasance if they fail to track down, report or effectively investigate and punish grave violations of laws and regulations committed by enterprises, mete out disciplinary or administrative sanctions depending on actual circumstances, and refer such cases to judicial organs for investigation of criminal liabilities pursuant to the law if criminal offenses are constituted.
7. The Party's leadership over SOEs shall be strengthened and improved.
(24) The core political role of the Party organizations of SOEs shall be fully displayed. It is critical to unify the efforts to strengthen Party leadership with those to improve corporate governance, include the overall requirements on Party building into the articles of association of SOEs, make clear the statutory role of the Party organizations of SOEs in their corporate governance structures, and innovate the channels and means for the Party organizations of SOEs to play their core political role; always plan for Party building, set up the structure of Party organizations and work agencies, have in place persons in charge of Party organizations and staff members responsible for Party affairs, and carry out Party work simultaneously during SOE reform, and ensure that the Party organization of a SOE has robust work agencies and a stable team of staff responsible for Party affairs, and that the role of the Party organization and Party members is effectively played; uphold and improve the leadership framework featuring two-way access and cross-representation, allow members of a SOE's Party organization leadership who satisfy the prescribed conditions to be included in the board of directors, the board of supervisors or the management through statutory procedures, and allow members of a SOE's board of directors, board of supervisors and management who are Party members and who meet relevant requirements to be included in the SOE's Party organization leadership in accordance with applicable provisions and procedures; and, engineer an appropriate cross-representation between members of the management of a SOE and those of its Party organization leadership. In principle, a SOE shall set the position of the chairman of the board of directors separately from the position of the general manager, and its Party secretary and chairman of the board of directors shall generally be served by the same person.
The Party organization of a SOE shall effectively assume and perform the responsibilities to manage and govern Party affairs and discipline, always manage and govern Party affairs and discipline based on rules and in a rigorous manner, build up Party organization from the ideological perspective, enhance the awareness for Party management and governance, establish and improve the accountability system for Party building, and focus every effort on Party building, so as to assume and perform its responsibilities with due diligence. The secretary of the Party organization of a SOE shall earnestly perform his/her duties as the primary person in charge of Party building, while the other members of the Party organization shall effectively perform the dual responsibilities required of their respective positions to effectively carry out Party building in light of the division of their business. Where the Party secretary of a central enterprise also takes other key leadership positions, the central enterprise shall have a deputy Party secretary who is in charge of Party building on a full-time basis. In addition, it is required to build up the grass-roots party organizations and the teams of Party members in SOEs, reinforce basic safeguards for grass-roots Party building in SOEs, and give full play to the role of grass-roots Party organizations as the foremost fighting force and the role of CPC members as pioneers and role models; and, strengthen the leadership of enterprises' Party organizations over the mass work, play well the role of trade unions, the Communist Youth League and other mass groups and organizations, and carry out employee ideological and political work in an in-depth and meticulous manner.
Establishing Party organizations and carrying out Party work shall be the necessary prerequisites for SOEs to push forward mixed ownership reform. The methods to set up Party organizations, and the responsibilities and management models thereof shall be scientifically determined according to the characteristics of different types of mixed ownership enterprises.
(25) More efforts shall be made to build up the leadership teams and talent teams of SOEs. It is vital to specify the criteria and procedures for personnel selection and employment according to the reform and development needs of enterprises, and innovate the methods for personnel selection and employment; reinforce the responsibilities of the Party organization of an enterprise in the selection and appointment, training and education, management and supervision of the enterprise's leaders, support the board of directors to select persons in charge of operations and management, and such persons to exercise the power to recruit personnel pursuant to the law, and resolutely prevent and rectify improper practices in personnel selection and appointment; strengthen the routine supervision and management as well as comprehensive evaluation and assessment of SOE leaders, especially principal leaders, promptly adjust those who are incompetent or fail to effectively perform duties, and effectively address the issue where SOE leaders can only be promoted and not be demoted; focus on the guidelines of reinforcing the sense of loyalty, expanding world vision, sharpening strategic thinking, enhancing the spirit of innovation and forging excellent conduct to build up the teams of entrepreneurs and fully display the role of entrepreneurs; and, vigorously implement the strategy of relying on talents to develop thriving enterprises, and speed up the establishment and improvement of the institutions and mechanisms for talents to gravitate towards SOEs.
(26) SOEs shall effectively perform the "two responsibilities" for anti-corruption. The Party organizations of SOEs shall earnestly perform their duties as the primary players responsible, while their disciplinary inspection agencies shall effectively perform supervisory responsibilities. It is required to strengthen education of Party nature, rule of law and early warning, and guide SOE leaders to strengthen their convictions and faith, consciously practice the requirements of "enhancing self-competency, exercising power and practicing self-discipline in a rigorous manner, and seeking business opportunities, starting business ventures and engaging in interpersonal activities in a practical fashion" and correctly perform duties and exercise power; establish a practical accountability system which shall be linked to enterprise appraisal, and investigate both the liabilities of the parties concerned to a case and the liabilities of relevant leaders; develop more details, procedures and systems for the dual leadership regime of SOE disciplinary inspection work, and reinforce the leadership of superior disciplinary inspection commissions over subordinate ones; strengthen and improve tour inspection of SOEs, and reinforce the supervision and restraint over the operation of power; and, keep using the thinking and methods of the rule of law to fight corruption, fine-tune anti-corruption institutions and systems, strictly enforce the provisions against formalism, bureaucracy, hedonism and extravagance, and strive to build effective mechanisms where enterprise leaders dare not to, are not able to, and do not want to, engage in corrupt practices.
8. Favorable environmental conditions shall be created for the reform of SOEs.
(27) Relevant laws, regulations and supporting policies shall be improved. It is necessary to strengthen the formulation, revision, abolishment and interpretation of relevant laws and regulations on SOEs, and ensure there are legal bases for major reform initiatives; effectively transform government functions, reduce matters requiring examination and approval, optimize systems, simplify procedures and raise efficiency; and, improve the public service system, promote government procurement of services, and accelerate the establishment of a stable, reliable, open and transparent mechanism for reasonable compensation of the public service expenditure incurred by enterprises. Efforts shall be made to improve and enforce preferential taxation policies in terms of asset valuation and appreciation, change of land registration, gratuitous transfer of State-owned assets, etc. that are involved in the reorganization and integration of SOEs, fine-tune relevant policies for the market exit of SOEs, and properly handle the adjustment of labor relations, the continuation of social insurance and other issues pursuant to the law.
(28) Efforts shall be made to separate enterprises from running ventures that can and should be assumed by social players and resolve issues left over by past practices at a quicker pace. It is essential to improve relevant policies, establish a reasonable cost-sharing mechanism between governments and SOEs, raise funds from multiple channels, take means such as separation and hand-over, reorganization and restructuring, closure and revocation, etc. to require SOEs to disinvest "water, electricity and power supply as well as property management business" in the employee dormitory areas and the hospitals, schools, community centers and other public service institutions that they run, continue to push for the reform of SOE-run collective entities, conduct social management of SOE retirees, properly resolve the issues of SOEs that are left over by past practices, and create conditions for SOEs to participate in fair market competition.
(29) An atmosphere encouraging reform and innovation shall be formed. It is imperative to emancipate our minds, seek truth from facts, encourage exploration, concrete practice and innovation, make comprehensive and accurate evaluation of SOEs, vigorously advocate the guidelines and policies of the Central Government on comprehensively deepening the reform of SOEs, publicize typical cases and experiences of reform, and create a favorable public opinion environment conducive to SOE reform.
(30) Organization and leadership of SOE reform shall be strengthened. Party committees and governments at all levels shall unify their thinking, and effectively exert their leadership over the tasks to deepen SOE reform with a high sense of political responsibility and historical mission. They shall formulate implementing opinions pursuant to these Guiding Opinions and in light of their respective realities, strengthen overall coordination, specify the division of duties, set detailed objectives and tasks, and reinforce supervision and implementation, in a bid to ensure that the drive to deepen the reform of SOEs progress smoothly and achieve tangible results.
The provisions otherwise prescribed by the Central Government, if any, concerning the reform of financial, cultural and other SOEs shall prevail.