Modern corporate systems need improvement – Opinion

Ma Xuejing/China Daily

Editor's note: Promoting high-quality development has become a key theme of China's economic and social growth. China's efforts to develop new high-quality productive forces will create new opportunities for win-win development and expand new practices in economic governance. Three experts shared their views with China Daily on this issue.

The seventh session of the Standing Committee of the 14th National People's Congress passed the revised Company Law on December 29 last year. The law, which will come into effect on July 1, aims to standardize enterprises, protect the legitimate rights of enterprises, shareholders, employees and creditors, improve the modern enterprise system with Chinese characteristics, promote entrepreneurship, maintain socio-economic order, and promote the development of a socialist market economy in accordance with the constitution.

To perfect a modern enterprise system with Chinese characteristics, it is essential to respect enterprise autonomy, adopt a problem-solving approach, and adjust policies based on enterprise size, stage of development, and nature of ownership.

For SOEs, the goal should be to ensure market-oriented operations, take measures to enhance synergy between internal and external markets, and reduce administrative control. They should also empower SOEs by giving them more autonomy and reducing regulatory constraints, strengthen incentive mechanisms with market-based compensation systems, and link compensation to performance through stocks and other incentives. They can also improve the efficiency and competitiveness of SOEs by promoting professional managers based on performance and ensuring that the majority of employees are hired through market-based processes.

Meanwhile, private enterprises should adopt the negative list as their basic policy and urge tax authorities to treat state-owned enterprises and private enterprises equally under the law. Meanwhile, higher authorities should strengthen the protection of private property rights and entrepreneurial interests, help create an environment in which private enterprises can thrive, review regulations that impede business operations, and revise or eliminate them where necessary, to ensure equal market access for all and promote fair competition.

Furthermore, in order to create more opportunities for private companies, local governments should endeavor to improve management and services that support small and medium-sized enterprises and sole proprietors, without relying on protectionism.

Building a modern enterprise system with Chinese characteristics requires the Party's guidance of state-owned enterprises, improving governance mechanisms, and ensuring accountability and supervision of state-owned capital. To this end, it is essential to establish clear roles and responsibilities, effective checks and balances, and integrate Party leadership with corporate governance.

Strengthening corporate board structures and giving them primary decision-making power over business operations would improve governance, and establishing a regulatory regime for mixed-ownership would improve efficiency. Private companies should also introduce fixed-term contracts, flexible and market-oriented compensation, and various long-term incentive programs for management to attract and retain talent.

Efforts should be made to encourage private enterprises to establish modern corporate governance structures through improving corporate governance, regulating shareholder activism, strengthening internal monitoring, and establishing robust risk prevention mechanisms.

The Party should take the lead in these efforts and help improve management standards, such as separating enterprise assets from shareholders' personal and family assets and clarifying the structure of enterprise property rights. Risk assessment and warning systems should be established to provide early warning of events that may cause serious harm to enterprises' operations and affect social stability, and private enterprises should strengthen risk prevention and control mechanisms covering such areas as strategic planning, investment and fundraising, and market operations.

In addition, it is necessary to utilize the role of party organizations in private enterprises to promote the legal education of employees in private enterprises, cultivate a corporate culture of sincerity and honesty, and improve the operation and management level of private enterprises.

Furthermore, to create an appropriate environment for promoting globally competitive high-tech innovation, China needs to adhere to its dual policies of “going global” and “bringing it at home,” expand scientific and technological exchanges and cooperation with other economies, build mutually beneficial partnerships, and participate in global high-tech governance.

China should also launch major global science programs and projects, increase the transparency of national science and technology plans, establish a global scientific research fund, implement scientist exchange programs, establish international science and technology organizations in China, and employ foreign scientists in China's science and technology institutions.

To promote globally competitive high-tech innovation and attract and retain top talent at home and abroad, China needs to further internationalize research, address researchers' practical concerns, properly handle pressing issues, and introduce more open talent recruitment policies to establish a world-class research and innovation base.

We should also improve policies on temporary stay for foreign high-end and professional talents, strengthen the permanent residence system for foreigners, raise salaries and benefits, strengthen social security, and provide tax incentives, so as to build a globally competitive and attractive environment for overseas scientists working in China.

Building a globally competitive environment for high-tech innovation and establishing an open and solid security foundation requires continuous strengthening of high-tech security systems and risk prevention mechanisms.

Furthermore, it is important to coordinate efforts to promote international cooperation and competition in the field of intellectual property rights.

China needs to not only better grasp the rules of technology operation in an open economy, fill in institutional gaps, and improve relevant legal systems and policy regulations, but also strengthen supervision, better safeguard national sovereignty, and enhance national security mechanisms.

These views do not necessarily represent those of China Daily.

The author is a researcher at the National Governance Academy.

If you have specific expertise or would like to share your opinions on our articles, please send your writing to [email protected] and [email protected].

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