Caixin: “Competitive Neutrality” for China’s SEOs

Some of China’s trade partners accuse the country of unfairly subsidizing its state-owned enterprises, and this is part of the reason the United States has imposed tariffs on many Chinese goods. Zhang Chunlin of the World Bank proposes competitive neutrality, a principle advocated by the Organization for Economic Cooperation and Development: restricting SOES from using state tools to increase their competitive advantage and requiring SOEs to act as independent commercial entities. Reforms required include separation of government from business, increasing transparency, fair compensation for SOEs that provide public services to reduce corruption, separation of private and public accounts, equal treatment for taxation and government procurement between private and public firms, an end to debt guarantees, and fair rates of return for government and SOE investments. No country has developed specific regulations on competitive neutrality though the Trans-Pacific Partnership suggests some guidelines as suggested by the United States. The Caixin essay concludes that China could develop its own program: “reform of the financial system, and the harmonization of competition policy and industrial policy will involve cleaning up anti-competitive industrial policies. – YaleGlobal