SOE reform not easy: WB report

China Daily, March 1, 2012

A World Bank report that urged China to speed up reform in State-owned enterprises (SOEs) has met with mixed responses from Chinese experts.

In a report published on Monday, the Washington-based lender suggested further reform of Chinese SOEs, including measures to recalibrate their access to public resources, introduce modern corporate governance, and implement ownership diversification where necessary.

The report also called for bigger support for private sectors to enter monopolized industries, including lowering barriers for entry and exit, as well as encouraging competition in strategic and pillar industries.

SOE reform was the first piece of advice among a series provided by the World Bank, and meant for reference to keep the world's second-largest economy on a path of steady growth over the next two decades.

But the report, authored by the World Bank and the Development Research Center under the State Council, a top think tank for the Chinese government, is likely to face resistance from "vested interest" groups, World Bank president Robert Zoellick told a conference in Beijing on Monday.

"Reforms are not easy, they often generate pushback," he said.

And opposing opinions could not come any sooner and more dramatically, as Du Jianguo, who claimed to be an independent scholar, showed up unexpectedly at a World Bank news conference on Tuesday, disrupting Zoellick's speech and denouncing the World Bank's prescriptions as "poison".

"Would you like the State assets to be appropriated by a few people, and banks privatized to destroy the Chinese economy and provoke an 'Occupy Wall Street' here as well?" according to a leaflet Du handed out at the conference before being ushered out.

Du complained the policy changes urging SOE reform for China had already been proven a failure in Latin America and elsewhere, and would damage the "competitiveness" of China's State enterprises.

Reports of Du's behavior soon spread online, with some viewing it as a "heroic" act while others said he was just trying to attract attention.

Zhao Nong, a researcher with Beijing-based Unirule Institute of Economics, said that there is no doubt a trend for deepened reforms of SOEs, but disputes may exist in the course of change as to whether to break down the monopoly barriers first, or to carry out ownership reform.

"Complete privatization of State assets is only an extreme way of ownership reform, and there are many other solutions for the problem," Zhao said.

Based on conversations with Chinese colleagues, Zoellick said momentum is building behind reform in China.

"But we don't expect a sudden 'big bang' reform in China and gradual reform is more likely," he said.