Sinosphere: Xi Jinping Reminds China’s State Companies of Who’s the Boss

Sinosphere: Xi Jinping Reminds China’s State Companies of Who’s the Boss

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President Xi Jinping of China in Beijing. This week he indicated that he was unwilling to relinquish too much control over China’s state enterprises.

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Andy Wong/Associated Press

BEIJING — A typical big company is chock-full of bosses, from the basement mail room all the way up to the executive suite. Even at the top, those in charge sometimes have to answer to big investors pushing for change.

China has said it wants to make its bloated state-owned companies more like that: Hungry, results-oriented and responsive to shareholders.

But this week, China’s top leader made clear to the chiefs of the country’s biggest companies that there is only one boss who matters. In an unusual meeting that ended on Tuesday, President Xi Jinping announced that the Chinese Communist Party had the ultimate say over state companies.

“Party leadership and building the role of the party are the root and soul for state-owned enterprises,” said Mr. Xi, who is also the party’s general secretary, according to the state’s official news media. “The party’s leadership in state-owned enterprises is a major political principle, and that principle must be insisted on.”

Mr. Xi’s comments, made at a national meeting to discuss the role of the party, indicate that he is unwilling to relinquish too much control over China’s state companies. Those state-owned companies — which dominate industries as disparate as banking, telecommunications and resources — command nearly 40 percent of China’s industrial assets and contribute to the government’s tight control over the economy, the world’s second-largest.

Senior leaders, including Mr. Xi, have made similar remarks over the past year. But major party leaders and executives from big state-owned companies attended, and the event received considerable attention through the country’s propaganda channels.

“There are no new policy ideas here, but the platform is significant,” said Wendy Leutert, a Ph.D. candidate at Cornell University who studies Chinese state companies.

The comments add to areas where the Communist Party has extended its dominance under Mr. Xi, including civil society and the arts. They are at odds with more market-friendly measures the Chinese government has pushed in recent years. Economists had hoped those measures would favor market-driven policies at the expense of party control and lead to efforts to trim unwieldy government-controlled companies. Long-awaited guidelines, published late last year, called for a greater role for markets and investors.

Historically, the overhaul of state-owned enterprises has proved to be politically unpopular because it meant laying off workers and reducing the rolls of those who received state benefits. A wave of reforms in the 1990s under Zhu Rongji, then China’s premier, resulted in up to 30 million jobs being cut and was known as breaking the “iron rice bowl.”

Still, economists believe reforming big, wasteful state-owned enterprises is crucial to China’s broader economic reform. They say state-owned enterprises absorb credit at the expense of smaller and medium-size businesses that need the money. Those companies could help diversify the country’s economy toward technology and consumer culture and away from the dusty world of manufacturing, exports and construction.

A long-preferred method for streamlining state enterprises has been to consolidate them by folding struggling companies into better-performing ones. Since 2003, the number of state-owned enterprises has dropped from 189 to 106.

China has also begun to eliminate so-called zombie companies in industries that have been plagued by overcapacity, including steel and cement. Leaders have also been willing to experiment with less top-down approaches, starting a $30 billion venture capital fund in August to encourage grass-roots innovation.

Yet Mr. Xi’s remarks this week show that such change must not run counter to the ideological aims of the party.

The attendance of Wang Qishan, Zhang Gaoli and Liu Yunshan — members of the Politburo Standing Committee, the party’s top decision-making body — underscored the importance of Mr. Xi’s comments.

Mr. Wang, the head of the party’s powerful discipline and inspection commission, has been instrumental in the far-reaching anti-corruption campaign that has brought down thousands of high-ranking leaders and low-level officials alike. By 2015, the commission headed by Mr. Wang had detained 124 top executives from China’s state enterprises.

Mr. Xi hinted at indiscretions at state enterprises in his remarks, saying that supervision over officials in crucial positions needed to be intensified.

State-owned enterprises have never been given a long leash by China’s ruling party.

In 2009, at another meeting convened to discuss the party’s role in state-owned enterprises, Mr. Xi, then vice president, declared the party to be “an essential feature in the establishment of a modern enterprise system with Chinese characteristics.”

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