Public should have faith in course of SOE reform

China's central authorities issued a guideline on Sunday to deepen reforms of the State-owned enterprises (SOEs). The guideline divides SOEs into two categories as for-profit entities and those dedicated to public welfare, and says supervision over State-owned assets should be improved. It proposes differentiated salaries for the executives. The guideline has been highly praised by Chinese academia. However, biased opinions about SOEs have long been popular and some don't believe the latest reforms will result decisive achievements by 2020. Sheng Hong, director of the Unirule Institute of Economics, claimed that the fundamental problem lies in the existence of SOEs and the reforms fail to touch upon the vested interests. Sheng also said SOEs should simply give way to private firms. The latest SOE reforms come under better macro-economic and social conditions than in the 1990s and are unlikely to produce prominent problems such as wide bankruptcy and massive layoff of employees. But given adverse public opinions, the reforms carry different risks from previous ones. The difficulties facing last SOE reforms in the 1990s look unimaginable nowadays. If put in the current backdrop, the layoff of tens of millions of employees could hardly be carried out and the boycott of public opinions may abort the reforms. But back then, the reforms proceeded and the government, society and media worked together to help those laid-off workers. Today's reforms are based on rational thinking and the long-term interests of the society. An analysis of the guideline shows no group will have their interests jeopardized directly. The reduction in executives' salary will help work out specific measures to inspire the managers. The recognition of the role of mixed-ownership makes it possible to address the monopoly and low efficiency of SOEs and form an equitable climate for doing business. But an unfriendly opinion about SOEs seems to have been solidified. Some voices that call for SOEs to exit create bewilderment among the public and anxiety among local SOE watchdogs. The corruption in SOEs has tarnished their reputation, but there is no common resentment of SOEs among the public. Chinese people do not want to see several private conglomerates grip the national economic lifelines. According to the guideline, by 2020 SOEs will hand over 30 percent of their profits to public finances. The increase of the percentage shows the SOEs are truly owned by the people. The important guarantee for pushing forward the latest reforms is that the public restores their trust in SOEs, supports the reforms and tolerates difficulties that may arise. SOEs are the basis of social equity in China. While many worry about the erosion of State-owned assets, the fundamental way to prevent it is to strengthen SOEs through reforms. Admittedly, negative opinions about SOEs are related to their outdated practices in dealing with the public opinion and they have to gain support. SOEs and their watchdogs have to take action on this.