By: Jiangyu Wang & Tan Cheng-Han
This Article provides an early assessment of the impact on corporate governance of the most recent wave of reform of China’s state-owned enterprises (SOEs) announced by the CCP in 2013, officially known as the mixed-ownership reform (MOR). It offers a comprehensive and detailed account of the background, policy and regulatory frameworks, and rationale of the MOR in light of the history of ownership reform in China. It also conducts empirical studies of the change in ownership and board composition in over 30 SOEs which have recently completed their MOR experiments, as well as several case studies. It observes that MOR’s impact on SOE corporate governance has been embodied in the “retreat of the state,” the “advance of the Chinese Communist Party” (the Party), and a limited yet emerging separation of power between the Party and the board in SOEs. To explain this observation, the Article argues that the MOR programme is driven by three current beliefs of the Chinese Party-state on the future of SOEs in China. First, ownership and ownership reform matter. Second, sharing control, rather than dominance by a single state shareholder, improves both the efficiency and governance of SOEs. Third, the MOR was designed to develop partnerships or alliances between the state shareholders and strategic investors in order to help the post-MOR state enterprises improve their efficiency and enhance market opportunities.