The Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Upholding and Improving the System of Socialism with Chinese Characteristics and Advancing the Modernization of China’s System and Capacity for Governance (《中共中央关于坚持和完善中国特色社会主义制度、推进国家治理体系和治理能力现代化若干重大问题的决定》) (hereinafter referred to as the Decision), which was reviewed and approved by the Fourth Plenary Session of the 19th Central Committee of the Communist Party of China (CPC) (党的十九届四中全会审议), proposes for an upholding and improving of the basic socialist economic system and for promoting high-quality economic development. The Decision emphasizes the exploration of multiple forms of public ownership, advances the optimization and structural adjustment of the state-owned economy, develops a mixed-ownership economy, and enhances the competitiveness, innovation, control, influence, and anti-risk capabilities of the state-owned economy, making state-owned capital stronger, better, and bigger (做强做优做大). Deepen the reform of state-owned enterprises (SOEs) and improve the modern enterprise system with Chinese characteristics. Form a state-owned asset supervision system focusing on capital management to effectively play the role of state-owned capital in investing in and operating companies. This is a major deployment made by the Party Central Committee with Comrade Xi Jinping at its core to deepen the reform of SOAs and SOEs based on the overall development of the Party and the country. National SOA regulatory agencies must uphold and be guided by Xi Jinping’s new era of socialism with Chinese characteristics, deeply understand its significance and practical requirements, accelerate the transformation from managing enterprises to managing capital, and form a state-owned asset regulatory system that focuses on managing capital to make state-owned capital stronger, better, and bigger and to cultivate world-class enterprises with global competitiveness to provide a strong system guarantee. 

Profoundly grasp the basic requirements for the transition from managing enterprises to managing capital 

A sound SOA supervision system is an important guarantee for the reform and development of SOEs and is of great significance to the development and expansion of the state-owned economy. The key to forming a state-owned asset supervision system that focuses on managing capital is to realize the transition from managing enterprises to managing capital. Judging from the 70 years since the founding of New China, the reform and improvement of the SOA supervision system have generally gone through three stages. The first stage is the period of socialist construction after the founding of New China. At this stage, in line with the highly centralized and unified planned economic system, SOEs and SOAs were actually integrated, the management of enterprises and assets were highly unified, and the management of enterprises was the management of assets. The country mainly relied on the direct management and development of SOEs to establish an independent, relatively complete industrial system with a considerable scale and a relatively high level of technology in a relatively short period of time, laying the foundation for our country’s basic economic system. The second stage is from the reform and opening-up to the 18th CPC National Congress. At this stage, in line with the transition from a planned economy to a market economy in our country’s economic system, the property rights structure, organizational form, and operating mechanism of SOEs have undergone profound changes during the reform and opening-up, and SOEs and SOAs no longer completely overlap. SOAs include SOAs operated by wholly state-owned and wholly-owned enterprises as well as SOAs operated by mixed-ownership enterprises with state-owned holding and equity participation. Therefore, there are differences between managing enterprises and managing assets in terms of content, objects, and methods. Correspondingly, important steps have been taken in the reform of the SOA management system, and a three-level state-owned asset supervision system featuring the central, provincial, and municipal levels characterized by the combination of asset management and personnel management and affairs has been established, which has effectively promoted the implementation of responsibility for maintaining and increasing the value of SOAs and has actively promoted the reform and development of SOEs. In the third stage, since the 18th CPC National Congress, the Party Central Committee with Comrade Xi Jinping at its core has attached great importance to the reform of SOAs and SOEs, pointing out that it is necessary to strengthen SOA supervision with capital management to accelerate the transition from managing enterprises to managing capital, providing a direction and fundamental follow-up for the improvement of the SOA supervision system in the new era. At this stage, to meet the requirements of marketization and international development, SOEs have integrated with the market economy as a whole, becoming independent market entities that follow market rules and participate in market competition on an equal footing. The mixed ownership economy has become an important form of realization of the basic economic system with public ownership as the mainstay with common development of multi-ownership economies. Among the centrally managed enterprises (中央企业) supervised by the State-owned Assets Supervision and Administration Commission of the State Council (国务院国资委), the number of mixed-ownership enterprises accounted for about 70%, accounting for over 60% of total assets and operating revenue and over 80% of total profits. These enterprises have already entered the development stage of asset capitalization and equity diversification. The management model for wholly state-owned and wholly-owned enterprises is no longer suitable for state-owned holding and shareholding enterprises, and the management model for domestic SOEs is no longer suitable for “going global” (“走出去”). At the same time, to solve the problem of the non-separation of government and enterprise and the non-separation of government and capital that still exist in the SOA management system, eliminating the phenomenon of overstepping, absent, and misplaced supervision of SOAs (国资监管越位、缺位、错位), further improving SOA supervision mechanisms, optimizing the structure of the state-owned economy, and improving the efficiency of state-owned capital allocations are also urgently required to accelerate the transition from managing enterprises to managing capital. 

The transition from managing enterprises to managing capital is comprehensive, deep-seated, and fundamental. First, shifting from direct management of SOEs to supervisors based on investment relations in terms of regulatory positioning and philosophy. “Managing enterprises” places more emphasis on the direct management of SOEs. “Managing capital” places more respect on the status of enterprises as market players and on the property rights of corporate legal persons. This requires us to insist on the separation of government and enterprise and the separation of government and capital, to further clarify the responsibilities of SOA regulatory agencies, to effectively transform the supervision concepts of direct management, to rely more on property rights and capital ties, rely more on a company’s articles of association and corporate governance structure, and to adopt more methods such as exercising shareholder rights and playing the role of directors to perform investor responsibilities in order to encourage SOEs to truly become independent market entities that operate independently in accordance with the law, that  are responsible for their own profits and losses, that assume their own risks, that are self-disciplined, and that develop themselves. Second, shift from focusing on the individual development of enterprises to focusing more on the overall function of state-owned capital in terms of the objects and priorities of supervision. “Managing enterprises” focuses on microeconomic entities and pays more attention to the production and operations of a single SOE. “Managing capital” focuses on the value contribution of state-owned capital and pays more attention to the overall revenue and control of state-owned capital. This requires us to step out of the inertial thinking of simply supervising a single enterprise and instead take state-owned capital as a whole. From the perspective of serving the overall situation of the Party and the country, strengthen overall research, systematic planning, overall regulation, and scale operations, promote the rational flow of state-owned capital and maintain and increase the value of state-owned capital on a larger, deeper, and higher scale to promote the sustained development and growth of the state-owned economy and better serve national strategic needs. Third, in terms of regulatory approaches and methods, it is necessary to shift from mainly adopting administrative management methods to using market-oriented legal methods. “Managing enterprises” use more administrative means to regulate the production and operations of enterprises. “Managing capital” pays more attention to the use of market-oriented means to adjust the relationship between stakeholders within the framework of the rule of law to achieve regulatory goals. This requires us to work hard to overcome administrative thinking, effectively change the way in which authority is exercised that emphasizes approval, neglects supervision, and weakens services, insist on the combination of decentralization and regulation, insist that power is statutory and that power is used according to law, and perform duties in strict accordance with the powers and procedures prescribed by laws and regulations to better transform regulatory requirements into shareholder will through marketization and rule of law and reflect the various efforts of enterprise reform and development. Fourth, in terms of regulatory guidance and effects, it is necessary to shift from focusing on scale and speed to focusing more on improving quality and efficiency. “Managing enterprises” pays more attention to the production and operation indicators of enterprises, which can easily lead to the blind pursuit of bigger enterprises. “Managing capital” pays more attention to the rational flow of capital, optimizing allocation, and guiding enterprises to pursue development, quality, and benefits. This requires us to insist on quality first and give preference to benefits. In line with the requirements for high-quality development, we must encourage SOEs to accelerate the transformation of modes of development to realize changes in quality, efficiency, and power and to continuously improve the quality and efficiency of state-owned economic development. 

Build a sound SOA supervision system based on capital management 

To implement the requirements of the Decision and form an SOA regulatory system that focuses on capital management, SOA regulatory agencies across the country must uphold the guidance of the important expositions of General Secretary Xi Jinping on the reform and development of SOAs and SOEs and party building, uphold the separation of government and enterprises and the separation of government and capital, uphold the unification of deregulation and good management, focus on managing capital layouts, standardizing capital operations, improving capital returns, maintaining capital security, and adhering to the leadership of the Party in an effort to build an SOA supervision system and effectively enhance the systemic and targeted nature and effectiveness of SOA supervision. 

First, focus on managing capital layouts and building a structural adjustment system to optimize the layout of state-owned capital. Uphold market-orientation with enterprises as mainstays. There will be advancements and retreats (有进有退), and there are things that must be done and things that must not be done (有所为有所不为). Promote the optimization and structural adjustment of state-owned capital and enhance the overall function and efficiency of the state-owned economy. Manage the areas of distribution for state-owned capital. Formulate the National Fourteenth Five-Year Plan for the strategic adjustment of the distribution and structure of state-owned capital and coordinate the overall promotion of adjustment and optimization of the distribution of state-owned capital. Strengthen the leadership of strategic planning, focusing on national strategic needs and industrial development plans. Guide enterprises to focus on main responsibilities and main business investments, and promote the concentration of state-owned capital in important industries and key areas related to national security and the lifeline of the national economy with a concentration on strategic emerging industries by formulating a negative list of investment projects, strengthening main business management, and approving non-main business investment proportions. Manage the allocation of state-owned capital. Promote more state-owned capital investment in advanced manufacturing, revitalize the real economy, better support key core technology research, promote the establishment of an enterprise-based, market-oriented, and in-depth technological innovation system of industry, academia, and research, and support large, small, and medium-sized enterprises and various entities that integrate innovation and promote the transformation of S&T achievements, actively develop new kinetic energy, improve the basic capabilities of the industry and the level of modernization of the industrial chain, and play a role in accelerating the construction of a modern economic system. Manage the adjustment of the layout of state-owned capital. Taking supply-side structural reform as the main line, effectively promote the strategic reorganization and professional integration of enterprises. Vigorously resolve excess capacity, speed up the disposal of poor performing and inefficient assets, and liquidate them as soon as possible through mergers and reorganizations, closures and de-registrations, listing transfers, and bankruptcy liquidation to realize the transformation of state-owned capital forms and use state-owned capital in more needed areas. 

The second matter is to focus on standardizing capital operations and building a standardized and professional management system for state-owned capital. Uphold the law as the criterion, property rights as the foundation, and capital as the link to promote the standardized and professional management of state-owned capital and its organic integration within the market economy. Straighten out the supervision chain of state-owned capital operations. SOA regulatory agencies perform their responsibilities as investors for state-owned capital investment, operating companies, and other companies under direct supervision in accordance with the law, and state-owned capital investment and operating companies perform shareholder duties for invested enterprises. This scientifically defines the boundaries of ownership and management rights, effectively gives play to the role of state-owned capital investment and operating companies, increases the degree of delegation of power to enterprises, giving enterprises more autonomy, and further strengthens the dominant market position of enterprises. Improve the supervision system for the operation of state-owned capital. Strengthen the basic management work of property rights registration, property rights transfer, asset evaluation, asset statistics, and liquidation and capital verification and strengthen the management and control of major operations of state-owned capital. Establish and improve the state-owned capital operation mechanism and basic management system, strengthen the management of company articles of association, standardize the operation of the board of directors, and focus on fulfilling the responsibilities of investors through the legal person governance structure of SOEs. Strengthen the dynamic supervision of the operation of state-owned capital. Establish an online supervision system for SOAs and SOEs to conduct dynamic monitoring and real-time supervision of key links and major decision-making matters in enterprise operations. Strengthen the supervision of the circulation of state-owned property rights, increase the intensity of state-owned property rights entering the market, and promote SOEs to dispose of corporate assets at fair prices through the capital markets such as securities transactions and property rights transactions in accordance with laws and regulations. 

The third matter is to focus on improving capital returns and building an efficient operation system for state-owned capital. Adhere to the goal of observing and serving national strategies and promoting the preservation and appreciation of state-owned capital and use equity operations, value management, and orderly advances and retreats to promote the rational flow of state-owned capital and improve the efficiency of state-owned capital operations. Use scientific assessments to guide and improve capital returns. Improve the system of assessment and evaluation indicators, benchmarking world-class enterprises and highlighting an orientation that enhances competitiveness, innovation, control, influence, and anti-risk capabilities. Properly handle the relationships between becoming bigger and becoming stronger, between current and long-term planning, and between benefits and responsibilities. Strengthen assessments for improvements to quality and efficiency, serving national strategies, accelerating innovation-driven development, and deepening supply-side structural reforms. Implement differentiated assessments for enterprises with different functional positioning, different industry fields, and different development stages. Promote and increase capital returns through market-oriented mechanisms. Fully authorize and delegate powers, effectively reduce the number of approvals and reviews for investors, and minimize interference in production and operations activities. Improve incentives and constraints, guide and support the board of directors to strengthen the precise assessment of management, and promote the professional manager system. Promote the establishment of a sound mechanism in which factors of production such as labor, capital, land, knowledge, technology, management, and data contribute to market evaluations and where remuneration is determined by contributions. Coordinate the use of incentive policies such as equity incentives, dividend incentives, and employee stock ownership and explore the use of incentive methods such as excess profit sharing, virtual equity, and project follow-up investments to stimulate the enthusiasm and creativity of all kinds of employees in enterprises and thereby promote sustained improvements to enterprise efficiency and returns on state-owned capital. Promote and increase returns on capital with refined budget management. Optimize the structure of state-owned capital budget expenditures, increase the proportion of capital injections, and establish a standardized and market-oriented SOE capital replenishment mechanism. Implement investor rights to income, establish an orientation towards performance, pay attention to the long-term returns of state-owned capital, and guide and encourage enterprises to reflect the will of investors with respect to revenue acquisition and the direction of expenditures. 

Fourth, focus on maintaining capital security and building a complete supervision system for state-owned capital. Uphold the notion of abiding by ones duties (守土有责、守土尽责), speed up the establishment of a SOA supervision system with comprehensive coverage, a clear division of labor, coordination and collaboration, and strong constraints to prevent and resolve major risks and effectively prevent the loss of SOAs. Identify the risk of loss of SOAs and increase supervision. Aiming at corporate capital layouts, key businesses, key areas of reform, and important links in operations, strengthen the supervision of key matters such as planning, investment, property rights, finance, assessment and distribution, selection and employment, and overseas state-owned assets, especially in encouraging enterprises to strengthen the establishment of internal control systems to effectively achieve complete systems, comprehensive controls, and effective execution. Identify the points of coordination of supervision and unite the joint efforts of supervision. Promote the coordination of supervisory forces such as investor supervision and discipline inspections, patrols, and auditing, make full use of various supervision and inspection results, accelerate the establishment of supervision work consulting, lead handover verification, and feedback rectification mechanisms to give full play to the combined efforts of supervision. Improve the information disclosure system, strengthen the construction of the information disclosure platform, actively accept community supervision, increase the disclosure of SOA supervision information, and disclose to the public the overall operation of state-owned capital, the maintenance and appreciation of SOAs of enterprises, the overall situation of business performance evaluations, and the state of SOA supervision system supervision and inspections. Identify the key points of accountability and improve the effectiveness of supervision. Strengthen interim and post-event supervision, improve the supervision and accountability system and organizational system, and establish a responsibility investigation mechanism with clear responsibilities, clear processes, and orderly regulations. Strengthen accountability for violations, intensify the investigation and punishment of important and major cases, effectively play the role of deterrence and containment, and effectively maintain the security of SOAs. 

Fifth, focus on adhering to the overall leadership of the Party and build a party building system for state-owned capital holding and equity holding companies. Uphold the Party’s overall leadership over SOEs, regarding improving enterprise efficiency, enhancing enterprise competitiveness, and realizing the preservation and appreciation of SOAs as the starting point and goal of SOE party organization work and integrating party leadership and party building into the entire process and all aspects of capital management to ensure that state-owned capital always obeys and serves the interests of the party and the people. For wholly state-owned and wholly-owned and controlled SOEs, focus on building and improving a modern enterprise system with Chinese characteristics. Uphold the “Two Consistents” (“两个一以贯之”), unify the strengthening of the Party’s leadership and the improvement of corporate governance, give better play to the leadership role of the party committee (party group) of SOEs, and ensure that the direction, overall management, and implementation of the Party and the country’s policies and major deployments are resolutely executed within SOEs. For mixed-ownership enterprises in which state-owned capital is a shareholder, actively explore effective ways of enterprise party building. Establish party organizations and carry out party work as a necessary prerequisite for SOEs to participate in the reform of mixed ownership. Straighten out the affiliation of party organizations, and according to the characteristics of different types of mixed-ownership enterprises, clarify the setup methods, responsibilities, and management modes of the party organization to ensure the flow of state-owned capital. Wherever the party building is followed up, the role of the party organization will be brought into play. Persist in comprehensive and strict management of the Party and earnestly enhance the political function and organizational strength of grassroots party organizations. Uphold the principle of the Party’s management over cadres combined with the role of market mechanisms. Combine capital management and human supervision, deeply promote the construction of party style and clean government as well as the fight against corruption. Resolutely rectify formalism and bureaucracy and work hard to build a strong foundation and make up for shortcomings. Build grassroots party organizations into a strong fighting fortress for propagating the Party’s propositions, implementing the Party’s decisions, leading grassroots governance, uniting and mobilizing the masses, and promoting reform and development to effectively transform the advantages of enterprise party building into development advantages. 

Provide a strong guarantee and support for the formation of a SOA supervision system based on capital management 

Implementing the spirit of the Fourth Plenary Session of the CPC 19th Central Committee and forming an SOA supervision system that focuses on capital management is a major political task in the field of SOAs and SOEs across the country. Self-construction must be strengthened and the advancement of streamlining administration and delegating power, combining decentralization, and optimizing services must be deepened to accelerate the creation of high-quality professional SOA regulatory agencies and cadres and achieve ideological recognition, role transformation, and work advancement. With the most resolute attitude, the most stringent requirements, the most powerful measures, and the most solid style, promote the implementation of the requirements for functional transformation. 

First, ensure SOA regulatory agency loyalty to the Party and continuously consolidate the important material and political foundations for the Party’s governance. SOEs are an important material and political foundation of socialism with Chinese characteristics. To improve the SOA supervision system and promote the transition from managing enterprises to managing capital, it is necessary to uphold the leadership of political construction and continuously refine the political character of cadres that are loyal to the Party. To further improve political standing, proceed from the overall state of the work of the Party and the country and the overall state of the reform and development of SOAs and SOEs, plan to promote the transformation of functions, build and improve the working system for capital management, accelerate the centralized and unified supervision for operating and managing SOAs, and establish a general pattern of SOA supervision so that SOA supervision becomes “a game of chess” (一盘棋) (an organized and strategic overall plan). To further enhance political consciousness and strengthen political responsibility, regard accelerating self-reform and promoting functional transformation as practical actions to enhance the “Four Consciousnesses” (四个意识), strengthen the “Four Matters of Confidence” (“四个自信”), and achieve the “Two Upholds” (“两个维护”). To truly do our duty to the Party, supervise, guard, and develop SOAs well and make state-owned capital stronger, better, and bigger. Effectively become strong SOEs and accelerate the cultivation of world-class enterprises with global competitiveness so that the state-owned economy will always be a strong backing for the Chinese nation to stand among the nations of the world. Effectively work to the benefit of the people and promote the great development and great progress of SOAs and SOEs so that  the results of reform and development will better benefit the people and better satisfy their yearning for a better life. 

The second is the professional supervision of SOA regulatory agencies to effectively improve the quality of SOA regulatory agencies. To adapt to the new situation and new tasks, make great efforts to supplement the capability and quality shortcomings of the SOA supervision cadre team in order to ensure the high-quality and high-level management of state-owned capital. To strengthen the learning of SOA supervision business knowledge, strive to master professional knowledge and related knowledge of finance, fiscal affairs, and law, and continuously improve the ability to grasp the laws of SOA supervision and enterprise development. To actively respond to the new situations, new problems and challenges encountered in the process of transforming from managing enterprises to managing capital, comprehensively search for non-conformities, incompatibilities, and inadequacies. Have the courage explore, practice boldly, and creatively take practical and effective measures to put the functional transformation requirements in place. To strengthen improvements in practical ability, go deep into enterprises  and the front line to investigate and understand the expectations and needs for strengthening the supervision of SOAs based on capital management, especially in places where there are more difficulties, complicated situations, and sharp contradictions so as to find golden keys to solve problems through grassroots practice. 

Third, assure the Party and the people and satisfy the enterprise with the outstanding style of SOA regulatory agencies. To strengthen institutional awareness, strictly implement the SOA supervision system and improve authoritative and efficient system implementation mechanisms. Achieve the “Two Upholds” in consciously respecting the system, strictly implementing the system, and resolutely maintaining the system to ensure that the Party Central Committee’s decisions and deployments are fully implemented with respect to SOAs and SOEs. At the same time, if problems are found in the implementation process, adjustments and improvements must be made in time. Reform, innovate, and work hard. Encourage the spirit of entrepreneurship with a positive energy that excites. For the key tasks of capital management that have been clearly defined, insist on doing things quickly. With the spirit of driving nails, one by one, firmly, practically, and properly grasp these initiatives. To serve development, be diligent and responsible, keep your career at heart, shoulder responsibilities, firmly grasp the top priority of development, integrate supervision into service, and win the trust of enterprises and the praise of the public with professional and high-level services. Work hard, be honest, and uphold integrity. Vigorously promote the spirit of arduous entrepreneurship, struggle, and prosperity, firmly establish the right view of power, status, and interests, and always place discipline and rules at the forefront. Strictly implement the spirit of the CPC Central Committee’s Eight-Point Decision on Improving Party and Government Conduct (中央八项规定), resolutely oppose the “Four Malfeasances” (“四风”), avoid formalism and bureaucracy, do things well, use power with the public in mind, and consciously accept the supervision of the party organization and the people. Always maintain a clean and honest political character and resolutely serve as a loyal and upright guard of SOAs and a pragmatic and honest public servant for the people.