China Emerging_ 1978-2008 - Xiao-bo , Wu [62]
In one important respect, the process of this share-structure reform bears great resemblance to the earlier “price-breaking-through-the-pass” reform of the late 1980s and the “enterprise-ownership-rights” reform of the late 1990s. It displayed the virtues of “no more debate.” Every time a major reform in China was vigorously debated and forcefully proposed, it produced few results and was eventually aborted. It might even have the negative effect of creating social discord and chaotic public opposition. When things had calmed down and the antagonists had run out of steam, the reform was able to accomplish the break-through progress.
In 2004, macroeconomic measures were bringing to the fore deepseated contradictions that pitted economic growth against systemic reform. Economist Wu Jing-lian was of the opinion that China’s reform was entering “the deep end of the pool.” With each step forward, it was impinging upon the vested interests of some individuals or some ministries. Further reforms encountered stiff opposition from them. To many observers, the phrase “deep end” had many meanings. It not only signified the ever greater difficulties of reform in the future but also the unknown depths into which reform was plunging. It implied a greater complexity and diversification of conflicts of interest. It meant that China was entering a vast, uncharted, and totally unknown commercial era.
For many Chinese, the recent past is already a different country. In 2006, Time magazine published an issue with Mao Zedong on the cover. Time had featured Chairman Mao on the cover six times, but this time, he was wearing clothes with a Louis Vuitton label, and the caption was “Quiet Revolution.”
On the high-speed superhighway of China’s economic development, the privileged position of large state-owned enterprises was now becoming apparent. Their monopolizing position in the realm of resources was being consolidated in an unprecedented way. If you were to think of China’s economy as a tree full of apples, then these companies were the recipients of all the apples from the biggest and most bountiful branches. Meanwhile, the competitiveness of these organizations was also being strengthened with the adoption of a modern corporate governance structure. In the three years since the establishment of the State-owned Assets Supervision and Commission of the State Council (SASAC), income from the primary businesses of enterprises directly under the central government grew by 78.8%, which was an annual increase of 21.4%. Profits grew by 140%, which was an annual increase of 33.8%. Tax revenue to the government increased by 96.5%, an annual increase of 25.2%. The rate of return on net assets was 10%, increasing by 5% over the three years. The rate of what is called the “preservation of state-owned assets” reached 144.4%. These state-owned industries and enterprises have truly become an invincible fleet.
Natural-resource industries serve as a good example of this. China’s three large monopoly oil companies enjoyed explosive profits from 2004– 2006, as resources became scarcer around the globe and the price of crude oil went from US$25 to US$70. China’s three large oil companies are China Petroleum & Chemical Co. (also known as Sinopec), China National Petroleum Corp. (or CNPC, also known as PetroChina, which is the trading arm of CNPC), and China National Offshore Oil Corporation (or CNOOC). In 2004, the net profit of Sinopec grew