SASAC’s Comment on Provisional Measures -on Management of Comprehensive Performance Evaluation of Central SOEs |
| FROM： CREATEDATE：2009-02-03 |
Recently, SASAC promulgated the Provisional Measures on Management of Comprehensive Performance Evaluation of Central SOEs (hereinafter referred to as the Provisional Measures). And relative responsible persons from SASAC answered the questions raised by the press regarding the Provisional Measures.
Question (Q): Would you please introduce the background of promulgating the Provisional Measures?
Answer (A): To carry out enterprise performance evaluation is an internationally popular practice by which some countries enhance the management of their SOEs. When SASAC was established three years ago, both the Institutional Functions approved by the State Council and Interim Regulations on Supervision and Management of State-owned Assets of Enterprises clarified that the system of enterprise performance evaluation would be set up to comprehensively evaluate the invested enterprises. Through three years’ practice, the structure of State-owned assets supervision and administration system has been basically established, and various fundamental management systems have been perfected day by day. However, the guiding force on SOEs’ operational activities is still not strong enough. Some enterprises heavily conducted short-term activities, only focusing on the target of current profit, while neglecting fostering the sustainable development capability and market competitiveness. In order to develop large companies and large enterprise groups with indigenous IPR and international competitiveness, and to guide SOEs, especially central SOEs, to healthily develop themselves, a comprehensive evaluation system is needed to comprehensively judge the profitability and assets operation quality of enterprises, diagnose the problems existing in enterprises’ operation and management, and guide enterprises to correctly operate their business. Against this backdrop, SASAC promulgated the Provisional Measures.
Q: What are the characteristics of the enterprise comprehensive evaluation system prescribed in the Provisional Measures?
A: The Provisional Measures was promulgated according to the requirement of the investor to supervise its enterprises. The enterprise comprehensive evaluation system prescribed in the Provisional Measure has three main functions of comprehensive judgment, analysis and diagnosis and behavior guidance. This system is also fully characterized by comprehensiveness, objectivity and fairness.
First, it regards the analysis of investment and output as the core, analyzing the rate of return on invested assets and the quality of profits, which is the nature of the investor. Second, it carries out comprehensive evaluation from various perspectives. The evaluation of financial performance, which includes enterprise’s profitability, assets quality, debt risk and operational growth, can comprehensively reflect enterprise’s financial status. The evaluation of management performance, which includes eight aspects such as implementation ability of enterprise strategy, ability of decision-making in operation, ability of risk control and so on, can comprehensively reflect enterprise’s management capability. Third, it combines quantitative analysis and qualitative analysis together. This system categorizes enterprise operational performance into two kinds: financial performance and management performance, separately setting quantitative financial index and qualitative appraisal index, in order to conquer the shortages brought by simple quantitative evaluation. Fourth, it uses industrial standards, including both domestic standards and international standards, to conduct the evaluation. On the one hand, this can add much objectivity and fairness to the result of the evaluation. On the other hand, this is also conducive to guide enterprises to compare themselves with industrial standards, finding out their own weakness, and catching up with domestic and international advanced standards.
Q: How can the enterprise comprehensive performance evaluation reflect the differences among different industrial sectors?
A: This question deals with the standards of evaluation. The enterprise comprehensive performance evaluation includes financial performance quantitative evaluation and management performance qualitative evaluation. For financial performance quantitative evaluation, it adopts uniformly formulated industrial evaluation standards, which are figured out according to the national enterprise financial statistics data. Those standards are divided into more than 100 categories in accordance with the national economic sectors make-up. Therefore, each enterprise is evaluated by means of the standard of its own sector. Since industrial standards reflect different profitability levels, market environments, operational specialties and industrial policies in different industrial sectors, the enterprise comprehensive performance evaluation can fully reflect different industrial characteristics of different enterprises.
Q: What’s the purpose of introducing international standards in evaluation?
A: The Outline of the Eleventh Five-Year Plan for National Economic and Social Development, which was approved in the 4th Session of the 10th NPC, prescribes that China is to develop large companies and large enterprise groups with comparatively high competitiveness, fostering China’s own multi-nationals. This is a strategic decision. Recently, the overall quality and competitiveness of China ’s SOEs, especially central SOEs, are improved greatly. Comparing to international large companies, however, most of China ’s SOEs still lag far behind them. In order to further guide China ’s SOEs to upgrade their operational management to the level of that of international large companies, enhancing their international competitiveness, SASAC introduces international standards in the enterprise comprehensive performance evaluation. We simultaneously use both domestic standards and international standards to evaluate China ’s large enterprise groups, in order to find out their advantages and disadvantages, promoting them to compare themselves with international industrial standards. International standards might represent the level of a certain excellent enterprise in a certain industrial sector of the world. They might also represent the average level of a group of leading enterprises in a certain industrial sector of the world.
Q: Would you please introduce how to utilize the enterprise comprehensive performance evaluation in State-owned assets supervision and administration?
A: Promulgating the Provisional Measures is to perfect SASAC’s methods of supervising and managing the invested assets, enhancing its supervision on central SOEs. The result of performance evaluation is the comprehensive reflection of enterprise’s operational results, assets quality, debt risk and corporate growth, which can provide the investor with important reference in its supervision work, such as financial supervision, structural readjustment, administration of enterprise’s responsible persons and so on. At present, comprehensive performance evaluation is mainly applied in the economic responsibility auditing of enterprise’s responsible persons and in enterprise financial supervision. In the past, the economic responsibility auditing lacked effective methods to judge the office-term operational performance of enterprise operators. While the enterprise comprehensive performance evaluation is applied to the economic responsibility auditing, it lays sound ground for comprehensively judging the office-term operational performance of enterprise operators, which is conducive to formulate objective and fair auditing conclusion. Therefore, the enterprise comprehensive performance evaluation is an important instrument for administrating enterprise’s responsible persons. For applying comprehensive performance evaluation into enterprise financial supervision, the annual performance evaluation is to be carried out according to the audited final account of enterprise, in order to further examine enterprise’s operational results, diagnose the problems existing in the management and operation, disclose operational risk, upgrade operational management and guide enterprise to healthily develop themselves. In addition, the enterprise comprehensive performance evaluation will be gradually adopted in target assessment, remuneration distribution, structural readjustment, development planning and other fields. Enterprise groups themselves can also use comprehensive performance evaluation to supervise their own subsidiaries.
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