China tells state firms to behave like normal companies

Beijing has issued guidelines for state-owned enterprises (SOEs) ordering them to act like regular businesses and continue cutting overcapacity in steel and coal, the South China Morning Post reports.

The move appears to be a response to recent complaints from China’s trade partners, particularly the United States, over the support and special treatment SOEs receive, which gives them an advantage over foreign competitors. Several weeks ago, trade ministers from the US, European Union and Japan jointly condemned SOEs for distorting markets.

Beijing’s previous policy was to make SOEs “bigger and stronger” and insist that firms put party loyalty over profit-making, but the Chinese government appears to be dialing back on this position.

On Tuesday, Vice Premier Liu He told attendees at a conference for SOEs that it was “utterly important” to make state firms act as “individual market players.” The conference also decided that SOE boards should have the freedom to make “significant decisions” about “personnel and compensation.”