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Xi to push ahead with SOE reforms?

Chinese President Xi Jinping attended the Fifteenth Central Leading Group on Finance and Economic Affairs, which is often regarded as an important reference for the National People’s Congress in March. At this meeting, he pointed out to speed up reform this year, along three main axis:(1) to continue with the shutting down of “zombie” State-owned companies. (2)to restrict the borrowing by real estate companies and strengthen the supervisory system of financial system. (3)to increase the role of manufacturing industry in line to meet the China Manufacturing 2025 goals.

In my view, reforms should always be carried out carefully and the timing and depth of such reforms is key. In the past, those State-Owned Enterprises provided jobs for large numbers of the population and, therefore, shutting them down cannot be achieved without disrupting the social equilibrium: on one hand, the workforce needs to be redeployed to other activities. But, perhaps more difficult, is going to be to get rid of the top managers/CEO who, by definition, cannot be CEO anymore if the number of companies does indeed decrease.

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