· Document Number：No. 23 [2018] of the State Council

· Area of Law： State-owned Assets

· Level of Authority： Regulatory Documents of the State Council

· Date issued：07-14-2018

· Effective Date：07-14-2018

· Issuing Authority： State Council

· Status： Effective

Implementation Opinions of the State Council on Advancing the Pilot Program of the Reform of State Capital Investment and Operation Companies
(No. 23 [2018] of the State Council)
The people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government; all ministries and commissions of the State Council; and all institutions directly under the State Council:
Restructuring and establishing state capital investment and operation companies is an important measure to reform the system of authorized operation of state capital with a focus on capital management. In accordance with the relevant requirements of the Guiding Opinions of the CPC Central Committee and the State Council on Deepening the Reform of State-Owned Enterprises and the Several Opinions of the State Council on Reforming and Improving the State Asset Management System and the working arrangements of the CPC Central Committee and the State Council, for the purposes of accelerating advancement of the pilot program of reform of state capital investment and operation companies, the following implementation opinions are hereby offered.
I. General requirements
1. Guiding ideology.
The spirit of the 19th CPC National Congress and the Second and Third Plenary Sessions of the 19th CPC Central Committee shall be fully implemented, Xi Jinping Thought on Socialism with Chinese Characteristics in a New Era shall be taken as the guidance, the direction of socialist market economy reform shall be adhered to, party leadership over state-owned enterprises shall be unswervingly strengthened, the focus shall be on innovating systems and mechanisms, the state asset management system shall be bettered, and the reform of state-owned enterprises shall be deepened, so as to promote the preservation and appreciation of the value in state assets, drive state capital to become better and stronger, effectively prevent the loss of state assets, and powerfully exploit the inspiring role of state-owned enterprises in deepening supply-side structural reforms and promoting quality economic development.
2. Objectives of the pilot program.
By restructuring and establishing state capital investment and operation companies, state capital investment and operation entities shall be set up, the system of authorized operation of state capital shall be reformed, and the state asset management system shall be improved, so as to achieve the separation of ownership of state capital from rights of operation of enterprises and implement market-oriented operation of state capital. The role of state capital investment and operation companies as platforms shall be used, the reasonable flow of state capital shall be boosted, the investment direction of state capital shall be optimized, and concentration shall be weighted in favor of priority industries, critical areas, and advantageous enterprises, so as to promote the optimization of layout and restructuring of state-owned economy, improve the efficiency of allocation and operation of state capital, and better meet national strategic needs. Pilot programs shall be first conducted, bold exploration shall be conducted, and the resolution of priority and difficult problems in the reform shall be researched in a timely manner, so as to gain experience and models susceptible of replication and promotion as soon as possible.
3. Basic principles.
Adhering to party leadership: A modern state-owned enterprise system with Chinese characteristics shall be established and improved, party leadership shall be integrated into all links of corporate governance, party organizations in enterprises shall be embedded in the corporate governance structure, the statutory status of party organizations in the corporate governance structure shall be clarified and implemented, and the leadership role of party organizations shall be maximized, so as to ensure the implementation of party and state line, policies, and major decisions and arrangements.
Adhering to innovation in systems: The regulation of state assets shall be strengthened with a focus on capital management, and the market-oriented mechanism for the investment and operation of state capital shall be improved. The boundary of rights between the government and state asset regulatory agencies and between state capital investment and operation companies and enterprises in which a share in held shall be scientifically and reasonably defined, the authorization chain unifying rights and responsibilities shall be improved, the status of enterprises as market participants shall be further implemented, and backbone state-owned enterprises with innovative capabilities and international competitiveness shall be cultivated.
Adhering to optimizing the layout. By authorizing state capital investment and operation companies to perform the duty as capital contributors, the reasonable flow of state capital shall be promoted, and the layout of state capital shall be optimized, so as to enable state capital investment and operations to better serve national strategic goals.
Adhering to strengthening supervision: The relationship between authorizing operations and strengthening supervision shall be correctly dealt with, supervisory duties shall be specified, a supervisory system consisting of government supervision, disciplinary and supervisory inspection, supervision by capital contributors, and social supervision shall be established and reinforced, and the synergy, pertinence, and efficacy of supervision shall be heightened, so as to prevent the loss of state assets.
II. Content of the pilot program
1. Functional orientation.
State capital investment and operation companies are all state-owned proprietorships that perform the duties as state capital contributors within the authority of the state and are professional platforms for market-oriented operation of state capital. The companies shall, with capital as a link, based on property rights, operate state capital in a lawful and autonomous manner and refrain from engaging in specific production and operation activities. State capital investment and operation companies shall exercise the duties as shareholders towards the enterprises in which a share is held, safeguard the lawful interests of shareholders, assume limited liability to the extent of capital contributions, and by the principle of rights equivalent to duties, practically shoulder the duties to optimize the layout of state capital, improve the efficiency of state capital operation, and achieve the preservation and appreciation of the value in state assets, among others.
State capital investment companies shall, with the main object of serving national strategies, optimizing the layout of state capital, and heightening industry competitiveness, in important industries and critical fields related to national security and the lifeline of the national economy, according to the requirements for the layout of state capital and structural optimization made by the government, with a focus on controlling strategic core business, through investment and financing, industry cultivation, and capital operation, among others, play a role in guiding investment and effecting restructuring, promote industry clustering, resolution of overcapacity, and transformation and upgrading, develop core competitiveness and innovative capabilities, vigorously participate in international competition, and pay particular attention to improving the control and influence of state capital.
State capital operation companies shall, with the main object of improving the efficiency of operation of state capital and increasing the returns on state capital, with a focus on financial holdings, by equity operation, fund investment, cultivation and incubation, value management, orderly advancement and withdrawal, and other means, revitalize stock state assets, guide and drive the common development of social capital, and realize the reasonable flow of and the preservation and appreciation of the value in state capital.
2. Manners for establishment.
According to the objectives, tasks and fields for layout determined by the state, state capital investment and operation companies may be established either by restructuring or newly. According to the specific orientation and development needs of state capital investment and operation companies, relevant state capital shall be restructured by gratuitous transfer, or in a market-oriented manner.
The assets transferred to state capital investment and operation companies shall be all or part of the shares (assets) in the existing enterprises. Upon transfer of shares, the divestiture of state-owned enterprises of social functions and the resolution of ancient pending problems shall be accelerated according the policies in force, and non-performing assets and business, among others, shall be disposed of in a market-oriented manner. Transfer of shares involving a listed company shall comply with the provisions relating to securities regulation.
3. Authorization mechanisms.
The pilot program of state capital investment and operation companies shall be conducted in a manner that the duty as a capital contributor is conferred either by the state asset regulatory agency, or directly by the government.
(1) Authority of state asset regulatory agencies The government shall authorize state asset regulatory agencies to perform the duties as capital contributors towards state capital investment and operation companies as legally required; and the state asset regulatory agencies shall, according to the specific orientation and actual circumstances of state capital investment and operation companies, by the principle of“one policy for one enterprise,” authorize state capital investment and operation companies to perform the duties as capital contributors, formulate regulatory lists and responsibilities lists, specify the content and modes of regulation of state capital investment and operation companies, and implement the power of the board of directors of state capital investment and operation companies according to the law. State capital investment and operation companies shall perform the duties as state capital contributors within the authority. State asset regulatory agencies shall be responsible for the evaluation and assessment of state capital investment and operation companies, report to the people's governments at the same level on a regular basis, and pay particular attention on stating the investment of state capital under their regulation, the implementation of national strategic objectives by operation companies, the preservation and appreciation of the value in state assets, and other information.
(2) Direct authority of the government. The government shall directly authorize state capital investment and operation companies to perform the duty as state capital contributors within its authority. State capital investment and operation companies shall autonomously operate state capital as authorized, implement national strategies and objectives of policies, report on annual work to the government on a regular basis, and make a timely report on major issues. The government shall directly evaluate and assess state capital investment and operation companies.
4. Governance structure.
A state capital investment or operation company shall not have a shareholders' meeting, but the government or the state asset regulatory agency shall exercise the power of a shareholders' meeting, or may authorize the board of directors of the state capital investment or operation company to exercise part of the power of a shareholders' meeting. State capital investment and operation companies shall, as required by the modern state-owned enterprise system with Chinese characteristics, set up party organizations, board of directors, and management, regulate corporate governance structure, establish and improve a supervisory mechanism of decision execution, featuring equal rights and responsibilities, operational coordination, and effective checks and balances, and capitalize on the leadership role of party organizations, the decision-making role of the board of directors, and the operation and management role of the management.
(1) Party organizations. It shall be unified to strengthen party leadership and improve corporate governance, and the role of party organizations in guiding the direction, managing the overall situation, and ensuring implementation shall be maximized. The combination of the principle of the management of officials by the party with the lawful election of the board of directors, the lawful election of the management by the board of directors, and the lawful exercise of the right of appointment by the management shall be adhered to. According to the principle of "two-way entry and cross-assumption of offices," the qualified members of the leadership of a party organization may enter the board of directors and the management through statutory procedures, and the members of the board of directors and the management, who are qualified party members, may enter the leadership of party organizations in accordance with relevant provisions and procedures. The secretary of the party organization and the chairman of the board of directors shall be generally the same person. For major management and operation matters, the research and discussion by the party organization shall be the precedent procedure in the decision-making by the board of directors and management. A state capital investment or operation company directly authorized by the State Council shall establish a leading party members' group. The disciplinary inspection and supervision authorities shall station disciplinary inspection and supervision bodies in state capital investment and operation companies.
(2) Board of Directors. A state capital investment or operation company shall set up a board of directors, which is responsible, as authorized, for the company's development strategy and outbound investment, the election, performance appraisal, remuneration administration of the management, appointment of directors to a company in which a share is held, and other matters. In principle, the board of directors shall consist of not less than nine members, who serve as executive directors, external directors, and worker directors. The rights of state capital investment and operation companies to elect an external directors in a market-oriented manner, among others, shall be protected, external directors shall be the majority in the board of directors, and worker directors shall be elected by the employee representatives' assembly. The board of directors shall have one chairman and may have a vice chairman. Under the board of directors, special committees, such as strategy and investment committee, nomination committee, remuneration and appraisal committee, audit committee, and risk control committee, may be established. The special committees shall conduct related work within the authority of the board of directors and assist it in performing its duties.
The executive directors and external directors of state capital investment and operation companies authorized by state asset regulatory agencies shall be appointed by state asset regulatory agencies. In particular, external directors shall be elected by state asset regulatory agencies, as needed for the structure of the board of directors of a state capital investment or operation company, from qualified full-time external directors. A chairman, or a vice-chairman, shall be designated by the state assets regulatory agencies from the members of the board of directors.
The executive directors and external directors (share directors) of state capital investment or operation company directly authorized by the government shall be appointed by the State Council or the local people's government, with the chairman and vice-chairman appointed by the State Council or the local people's government from the members of the board of directors. According to the functional orientation of a state capital investment or operation company, as external directors, the comprehensive administrative agency of the government or the relevant industry authority shall mainly nominate and select professionals, subject to the appointment by the government. An external director may concurrently serve as the chairman of a special committee under the board of directors and offer professional opinions in relevant fields on the major issues of the state capital investment or operation company in accordance with the rules of procedure of corporate governance structure.
For the appointment of external directors, the government, or state asset regulatory agencies, shall pay attention to broadening the sources of external directors, elect candidates in conformity with the orientation and professional requirements of state capital investment and operation companies, and establish an external director assessment mechanism, so as to ensure the maximization of the role of external directors.
(3) Management. The management of state capital investment and operation companies shall be responsible, with the authority of the board of directors, for the day-to-day investment and operation of state capital. In principle, the chairman and the general manager shall not be the same person.
The party organizations of state capital investment and operation companies authorized by the state asset regulatory agencies shall be under the management of the CPC Central Committee, local party committees, or the party organizations of state asset regulatory agencies, and the management of the leadership and its members shall, based on restructured enterprise groups, depend on specific circumstances. Specifically, for a state capital investment or operation company established by restructuring an enterprise administered by the Central Government, the leadership and its members shall be managed by the Central Government; and for a state capital investment or operation company established by restructuring of an enterprise not administered by the Central Government, or newly, the leadership and its members shall be managed as determined by the competence in management of officers.
The party organization of a state capital investment or operation company directly authorized by the government shall be under the management of the CPC Central Committee or the local party committee, and the leadership and its members shall be managed by the same.
The board chairman, director (other than external director), or senior executive of a state capital investment or operation company shall not, in principle, work part-time in another limited liability company, joint stock company, or any other economic organization.
5. Operating modes.
(1) Organizational structure. State capital investment and operation companies shall, in accordance with market-oriented, well-regulated, and professional management orientation, establish a management and control mode featuring clear duties, simplification and efficiency, and professional operation, and, respectively based on functional orientation, be specifically responsible for strategic planning, system development, resource allocation, capital operation, financial regulation, risk management and control, performance appraisal, and other matters.
(2) Performing duties and exercising rights. State capital investment and operation companies shall vigorously promote enterprises in which a share in held in establishing a well-regulated and sound corporate governance structure and exercise shareholders' rights by casting votes at the shareholders' meeting, appointing directors and supervisors, and other means, so as to build up a capital-linked investment relationship, coordinate and guide the development of the enterprise in which a share is held, and achieve relevant strategic intentions. A director, or supervisor, appointed by a state capital investment or operation company shall perform their duties in accordance with the law, exercise their rights in the same manner, be obligated to remain loyal and diligent towards the enterprise, earnestly safeguard the interests of shareholders, and abstain from interfering with the day-to-day operations of the enterprise in which a share in held.
(3) Election and appointment mechanism. A state capital investment or operation company shall establish a pool of candidates for the appointment of directors and supervisors, and the nomination committee under the board of directors shall propose competent candidates for an office according to the circumstances of the company of which the office is to be assumed, and report to the board of directors for deliberation and appointment. The business training, management, and evaluation and assessment of the appointed directors and supervisors shall be strengthened.
(4) Financial regulation. State capital investment and operation companies shall, in strict accordance with the relevant financial regimes and provisions issued by the state, strengthen corporate financial management and prevent financial risk. Enterprises in which a share is held shall be urged to strengthen financial management, implement the responsibilities for risk management and control, and improve operating efficiency.
(5) Revenue management. State capital investment and operation companies shall, as capital contributors, by relevant laws, regulations, and corporate bylaws, deliberate and vote on the distribution of the profit of the enterprises in which a share in held, collect dividends in a timely manner, hand over income of state capital as required, and use and manage retained income in the same manner.
(6) Evaluation mechanism. State capital investment companies shall establish a management and control mode with a focus on strategic objectives and financial benefits and, for the evaluation of an enterprise in which a share is held, pay particular attention to its execution of corporate strategy and returns on capital. State capital operation companies shall establish a financial management and control mode and, for the evaluation of an enterprise in which a share is held, pay particular attention to the flow of and the preservation and appreciation of the value in state capital.
6. Supervisory and restraint mechanisms.
(1) Improving the supervisory system. Supervision by capital contributors shall be integrated with audit, disciplinary inspection and supervision, visitation, and other supervisory forces, a supervisory work consultation mechanism shall be established, and, according to the principles of regulating regimes beforehand, strengthening monitoring in the course, and enhancing accountability subsequently, the overall supervision of state capital investment and operation companies shall be tightened, with supervisory efficacy improved. Disciplinary inspection and supervision agencies shall strengthen the supervision of the party organizations, board of directors, and management of state capital investment and operation companies and tighten the supervision of the leaders of state capital investment and operation companies in respect of their integrity and exercise of power. State capital investment and operation companies shall establish an internal routine supervision and audit mechanism and information disclosure system, intensify the regulation of power concentration, capital intensive, resource clustering, asset gathering, and other priority departments and posts, and, without prejudice to state secrets or corporate trade secrets, disclose corporate governance and management structure, overall operation of state capital, related-party transactions, remunerations of persons in charge of the enterprises, and other information in a compliance, timely and accurate manner, so as to build transparent state-owned enterprises and voluntarily accept social supervision.
(2) Implementing performance appraisal. State capital investment and operation companies shall accept the comprehensive evaluation and assessment by the government or state asset regulatory agencies. The content of evaluation and assessment shall mainly include the implementation of national strategies, implementation of objectives of layout and structural optimization of state capital, implementation of various laws, regulations, regimes, and corporate bylaws, decision-making in major issues and appointment and dismissal of major officials, operation efficiency of state capital, preservation and appreciation of value, financial benefits, and other aspects.
III. Implementation steps
The pilot program of state capital investment and operation companies shall be organized hierarchically, advanced by classification, and conducted duly, and relevant experience shall be summarized and promoted in a timely manner based on the progress of the pilot program. At the central level, it shall continue to be advanced that state capital investment and operation companies authorized by the state assets regulatory agency deepen the pilot program, and the work on the pilot program shall be continuously improved as required by these Implementation Opinions. The pilot program for state capital investment and operation companies directly authorized by the State Council shall be advanced, and central enterprises towards which the Ministry of Finance performs the duty to regulate state assets and the enterprises within the scope of the reform of centralized regulation of commercial state assets of central party and government agencies and public institutions shall be elected to conduct the pilot program steadily. At the local level, the pilot program shall be organized and implemented by all provincial people's governments in light of the actual circumstances.
IV. Supporting policies
1. Advancing simplification of administrative procedures and delegation of powers. With a focus on the implementation of the orientation of the responsibilities of capital contributors, the delegation of powers to state capital investment and operation companies shall be advanced in an orderly manner. State capital investment and operation companies shall be granted the power of approval of decision-making matters, such as transfer of state property rights, and the power of performance appraisal of the management and the administration of remunerations, among others, and relevant management requirements and operating rules shall be clarified by incorporation proposal and corporate bylaws.
2. Pilot program of consolidated reforms. Qualified state-controlled enterprises, in which a state capital investment or operation company holds a share, may be first supported in conducting mixed-ownership reform, employee stock ownership plan of mixed-ownership enterprises, the promotion of the professional manager system, remuneration distribution differentiation reform, and other reform pilot programs and leveraging the consolidated effects of various reforms.
3. Improving support policies. Tax incentives, in asset appraisal and value appreciation, land modification registration, gratuitous transfer of state assets, and other aspects involved in the restructuring and consolidation of state-owned enterprises, shall be strictly implemented. The procedures for industrial and commercial and tax registration and modification shall be simplified. State capital investment and operation companies shall be encouraged to duly resolve ancient pending issues and dispose of inefficient and ineffective assets. Policies for the administration of revenue and expenditure in state capital operating budgets applicable to state capital investment and operation companies shall be developed.
V. Organizing implementation
Accelerating the pilot program of the reform of state capital investment and operation companies is an integral part of deepening the reform of state-owned enterprises and a significant measure to reform and improve the state assets management system. The State Council's Leading Group for State-Owned Enterprise Reform shall be responsible for organizing, coordinating, and supervising the implementation of the pilot program of state capital investment and operation companies. The Organization Department of the CPC Central Committee, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Human Resources and Social Security, and the State-Owned Assets Supervision and Administration Commission of the State Council shall formulate and implement relevant supporting measures according to the division of labor based on duties, closely cooperate, and collaboratively propel the pilot program. The proposals for the pilot program for state capital investment and operation companies at the central level shall be implemented with the approval of the CPC Central Committee and the State Council.
Each provincial people's government shall be generally responsible for the pilot program of state capital investment and operation companies in its regions, closely based on the local actual circumstances, formulate a proposal for the implementation of the pilot program of the reform of state capital investment and operation companies applicable to its region, and energetically and duly organize the pilot program. Each provincial people's government shall file its proposal for the implementation of the reform pilot program with the State Council's Leading Group for State-Owned Enterprise Reform.
State Council
July 14, 2018