Although there are many ideas on how to deepen the reform of state-owned enterprises (SOEs), from a practical point of view, the most effective way to propel the SOEs reforms is still through merger and restructuring of the SOEs.

The research team at ANBOUND Consulting, however, is of the view that even if the merger and restructuring is done in a large scale, this is still a semi-finished product and there is long way to materializing the reform goals.

The main reasons being-

(i)The merger and restructuring of the SOEs is merely regrouping of the enterprises, this does not necessarily mean adjustment of the mechanism let alone the improvement of their efficiency;

(ii)The merger and restructuring needs to address a lot of ramifications, such as layoffs, burden reduction and job security.

(iii)The merger and restructuring does not mean increased competitiveness let alone marketization.

After completing the task of reducing the number of the SOEs, the reform of SOEs should move forward to the next key phase, namely marketization and breaking monopoly.

This remains a particularly arduous task.

The market-based reform can only be achieved gradually and the central government should focus on opening up more new market and nurturing new market actors.