Thursday, October 02, 2003

My comment on 3/6/03 when we found out that the SETC was disbanded:

Wow, huge. I can't believe they will downgrade SETC just like that. They
keep saying that reform is for efficiency, but getting rid of their
rivals' powerbase is closer to the truth, at least this time. Well, Zeng
Peiyan won in a big way in consolidating huge amount of power in his hand.
My question is: The Asset Management Commission will draw cadres from
which existing organizations? I suppose many SETC cadres will end up in
SAMC, e.g. LI Rongrong (?), but quite a few MOF officials will end up in
SAMC as well. Also, will they manage the banks, as well as normal SOEs?

There are both up and down sides to giving SOE management power to SAMC.
Currently, MOF cares only about how much money SOEs give to the MOF every
year, so it hounds SOEs for money allthe time. THis is a problem with
banks, which would rather use the money to write off loans. BUt, SAMC will
presumably have an ambiguous mission of getting a return from SOEs and
making them viable in the long-term. If they honestly carry out their
mission, that would be fine, but the mission for "long-term viability"
will create room for rent-seeking, much aswhat the SETC did in the past
administration. Oh well, what can you do; it's China.

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