As China embarks on its Eleventh Five-year Guidelines, State Owned Enterprises (SOEs) are being called to take the lead in increasing China's capacity to innovate. China's large and medium-sized SOEs have made significant gains in economic strength over the past 30 years, and have been a major driving force of the country's economic growth. Some SOEs have made it to the ranks of global top 500 and have even become leaders in their respective industries worldwide.
These successful SOEs are mostly in regulated industries, such as energy, petroleum, chemical, telecommunications, and finance. However, for SOEs in semi-regulated or deregulated industries, not only do foreign-invested and privately-owned companies present tough competition, some SOEs also suffer from talent and skills constraints, capital deficiency, limited and outdated products, and lack of financial control. These SOEs have insufficient mechanisms to systematically improve management and execution capabilities, therefore the plans initiated by regulatory bodies such as National Development and Reform Commission (NDRC) and the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) have not been implemented effectively. The gap between the SOEs' performance and the expectations set out in the original plans is, unfortunately, widening.
Since China introduced its reform and open-door policies, independent innovation, an initiative encouraged by the Central Government, has played an increasingly important role in the transformation and development of China's SOEs. As an Intellectual Supporting Partner of the Boao Forum for Asia Annual Conference 2006, we present our insights into how it might be facilitated. This special report focuses on the role of management innovation in supporting enterprise development and its importance in China's economic progress, and outlines the major implementation issues that require attention.