Guiding Opinions Research Articles

Pay Dispersion among Non-CEO Executives and Agency Efficiency in State-owned Enterprises

The differential compensation distribution of executives is an important direction of deepening the reform of state-owned enterprises (SOEs). The compensation of SOEs is mainly decided by SASAC according to the unified compensation management method, and tends to adopt the equalitarian compensation distribution mode, leading to the generally low pay dispersion among non-CEO executives in SOEs, which greatly frustrates the work enthusiasm of the executives in SOEs, and often leads to more serious executive agency problems. However, there are few studies on the difference of compensation incentives in the top management team, which mainly focus on the vertical compensation gap between CEO and non-CEO executives, and the research on the internal compensation allocation of non-CEO executives is relatively scarce.Using the compensation data of all the non-CEO executives in listed SOEs from 2005 to 2017, this paper studies whether the pay dispersion among non-CEO executives has a positive governance effect in reducing the executive agency costs of SOEs. We find that, the pay dispersion among non-CEO executives can effectively reduce the executive agency costs of SOEs, and the results are still robust after adopting the IVs and the differential compensation reform of SOEs in 2015 as the exogenous event to control the endogenous problem. Further, we document that reducing the supervision cost and improving the incentive efficiency of non-CEO executives are two potential mechanisms. Specifically, when there are more supervision costs and less incentives for non-CEO executives, the above positive governance effect are more salient.This paper offers empirical evidence for the positive governance effect of the pay dispersion among non-CEO executives in SOEs, and makes up for the deficiency of negative effects such as high turnover and poor corporate performance caused by the pay dispersion among non-CEO executives. This paper not only enriches the literature on the pay dispersion among non-CEO executives, but also extends the related literature on the executive agency costs of SOEs. In addition, this paper has certain policy reference value for further deepening the reform of SOEs and improving the differential compensation distribution system of executives in SOEs. The promulgation of Guiding Opinions on Deepening the Reform of SOEs in 2015 means that, in the context of a new round of comprehensively deepening the compensation reform of SOEs, the incentive mechanism of executives in SOEs should not be limited to the level of executive compensation, but should consider whether the compensation distribution within the top management team is reasonable. Increasing the pay dispersion among the top management team is not only an efficiency issue, but also a fair issue. The underlying economic logic is that the pay dispersion among the top management team is an institutional arrangement for SOEs to reduce the agency costs under the specific governance environment in China. Only by truly realizing differentiated incentives for the top management team, can the enthusiasm of executives in SOEs be effectively activated, the agency efficiency be improved, and the high-quality development of SOEs be realized.

The Bottlenecks and Countermeasures in the Transformation of Public English Teachers in Newly Upgraded Undergraduate Colleges based on the Analysis of Big Data

Since 2000, a number of newly-built undergraduate colleges have been established in China. From the perspective of the number of schools and the scale of training talents, newly-built undergraduate colleges account for about one-third of the total amount of higher-level undergraduate education from the analysis of big data. Under the new situation that the country is vigorously promoting the transformation of English teachers, with the upgrading of the national industrial structure and the development of emerging industries, it is particularly urgent to train high-level technical and skilled talents. In October 2015, the Ministry of Education, the National Development and Reform Commission, and the Ministry of Finance promulgated the “Guiding Opinions on Guiding the Transformation of Some Local Undergraduate Universities to Applied Types.”

Research on the Role of Financial Industry in Eliminating Overcapacity in Hebei Province

In order to solve the problem of excess capacity, Hebei Province has taken various measures to strictly implement the Guiding Opinions on Resolving Serious Overcapacity Contradictions issued by the State Council. In this process, most of the measures taken are administrative intervention, and the relationship among management measures, market rules and economic factors is not very clear. Based on this, this paper, starting from the excess capacity of Hebei iron and steel industry, analyses the relationship between investment return rate and investment ratio, and the relationship between profit and reduced capacity of iron and steel industry. On the basis of the analysis and the background of deepening the structural reform of supply side, this paper puts forward effective measures to solve the excess capacity of iron and steel industry.

Capacity Reduction Pressure, Financing Constraints, and Enterprise Sustainable Innovation Investment: Evidence from Chinese Manufacturing Companies

Resolving the problem of excess production capacity through sustainable technological innovation is an important issue facing the Chinese economy in achieving high-quality development. The Guiding Opinions of the State Council on Resolving the Contradiction of Severe Overcapacity promulgated by the government in 2013 undoubtedly had a huge external impact on the traditionally competitive manufacturing market. This paper uses 6680 company-year sample observations of 1609 A-share manufacturing listed companies in China from 2010 to 2017 to examine the impact of capacity reduction pressure on ‘corporate sustainable innovation’ (the strategic response made by the enterprise administrator to cope with the impacts of the external environment including economic, social and environmental aspects) investment and the moderating role of financing constraints on this relationship. The research shows that after the promulgation of the Guiding Opinions, the degree of overcapacity had a significant positive effect on the R&D investment of enterprises, indicating that the policy to resolve overcapacity promoted their sustainable innovation investment. Such a phenomenon indicates that, to a certain extent, in the context of capacity reduction, companies have strong pressure and motivation to seek a way out through sustainable innovation. However, financing constraints have a significant inhibitory influence on the anti-forcing effect of the capacity reduction policy, indicating that the ability of enterprises to respond to external capacity reduction policies is subject to their own limited financing. Further investigation shows that capacity reduction pressure mainly promotes the sustainable innovation investment of private enterprises and has no significant impact on that of state-owned enterprises. This may be because private enterprises struggled more for survival during the transition period. The results of this paper provide a theoretical basis and reference value for the formulation of government policies and the development of enterprises.

Medical Education Reform in China: The Shanghai Medical Training Model.

Medical Education Reform in China: The Shanghai Medical Training Model.

Green development assessment for countries along the belt and road

The construction of the green Belt and Road is an important aspect for the achievement of a green transition of the regional economy and an important aspect of the United Nations 2030 Agenda for Sustainable Development. The Chinese government has attached great importance to the green BRI, and it has successively issued the Guiding Opinions on Promoting the Green BRI and the Belt and Road Ecological and Environmental Cooperation Plan, which embodies China's firm determination and practical action to promote the green BRI. In this paper, an index system and multi-hierarchy linear summation method is proposed to evaluate the level of green development in 2015 for 49 countries along the Belt and Road. The results showed that the green development levels displayed spatial differences, varying from high to low in an easterly direction from the western region. The spatial differentiation was characterized by strong global spatial dependences and a ladder-like distribution that descends from west to east, with a centralized distribution of high-high zones and low-low zones and a dispersed distribution of low-high zones. This study also provides policy recommendations for Belt and Road countries.

State-owned Capital Gains, Profit Shifting and State-owned Enterprises’ Profits

In 2015, the Central Committee of the Communist Party of China and the State Council issued the “Guiding Opinions on Deepening the Reform of State-owned Enterprises”, pointing out that by 2020, decisive results will be achieved in the important fields and key links of the reform of State-owned Enterprises （SOEs）. One of the important aspects is to improve the corporate governance structure of SOEs, which is the important task of state-owned enterprise reform at present. Actually, many SOEs in China have not yet formed an effective governance structure, and the level of governance is limited.As the pillar of China’s national economy, the development of SOEs is of vital importance to the sustained and healthy development of China’s economy and the building of the socialist modernized country. However, there are serious agency problems in China’s SOEs, such as on-the-job consumption, excessive investment and profit shifting, which have led to huge efficiency losses. Western scholars generally hold that dividends can alleviate agency problems between business owners and managers effectively, moreover, increase corporate value. Some scholars in China have also found that the dividend payout of SOEs can bring about the reduction of free cash flow and the increase of supervision from external financing market, thus reducing agency costs and increases the value of SOEs. On the realistic condition provided by the fact that SOEs’ profits are increasing sharply, the call for SOEs to pay dividends to the state is getting higher and higher. In this context, China promulgated the “Administration Ordinance of Charging State-owned Capital Gains” （CQ [2007] No.309） in 2007, and began to collect state-owned capital gains.However, the current governance structure of SOEs in China cannot effectively restrain the behavior of management. In such a governance environment, forced gains payout of SOEs may breed new agency problems and enhance the profit shifting behavior of management, which would worsen corporate governance and lead to a decline in the profit of SOEs. This kind of worry is not unreasonable. After the implementation of the “Administrative Ordinance”, the total profit of SOEs did not continue its growth tendency and began to decline. This fact confirms the increase in the profit shifting behavior of SOEs’ management to some extent. But, there is not only no empirical test on this mechanism in the existing researches, but also less literature on the impact of charging state-owned capital gains on the profit of SOEs. So, this paper attempts to verify this mechanism and test the impact of the “Administration Ordinance” on the profit of SOEs.This paper uses the Difference-in-Differences method to evaluate the impact on the profit of SOEs, taking the “Administration Ordinance” as a policy shock with the A-share data of listed companies from 2003 to 2009.The study finds that: First, the implementation of the “Administration Ordinance” has a negative impact on the profit of SOEs, significantly reducing the rate of return on common stockholders’ equity （ROE） of SOEs. Second, through the mechanism analysis, we find that forced gains payout of SOEs and gains’ circula- ting in the body has increased the management’s behavior to turn over profits under the current governance level of SOEs, resulting in the decline in the ROE of SOEs. Third, the “one size fits all” rate of gains payout has made more decrease in ROE of large-scale SOEs than small-scale ones, which is called the unfair punishment of “whipping the fast and hard-working”.The marginal contribution of this paper is mainly reflected in: （1） Most of the existing empirical research studies the effect of dividends payout on SOEs, but little discusses the effect of the “Administration Ordinance” on SOEs, and even more rare about the influence on the profit of SOEs. This paper uses the Difference-in-Differences method to evaluate the impact of the implementation of the “Administration Ordinance” on the profit of SOEs, which will enrich the study in this area. （2） Although some scholars have suggested that forced gains payout may increase the profit shifting behavior of management, thus leading to the decline in the profit of SOEs, there is no empirical evidence to support this mechanism. This paper takes the degree of real activity earnings management as the measure of the profit shifting behavior of management, and empirically tests this mechanism.

Study on the Construction of New Port Area under the Background of National Marine Economic Development Demonstration Zone

Wu, D., 2019. Study on the construction of new port area under the background of National Marine Economic Development Demonstration Zone. In: Li, L.; Wan, X.; and Huang, X. (eds.), Recent Developments in Practices and Research on Coastal Regions: Transportation, Environment and Economy. Journal of Coastal Research, Special Issue No. 98, pp. 159–162. Coconut Creek (Florida), ISSN 0749-0208.The Marine Economic Development Demonstration Zone is a platform to undertake regional marine functions, including innovation of marine economic systems and mechanisms, marine industry agglomeration, land and sea integrated development, marine ecological civilization construction, and marine rights and interests protection. During the 13th Five-Year Plan period, China proposed an important deployment for the construction of marine economic development demonstration zones, which further optimize the layout of marine economic development. By exploring new ways of marine resource protection and development and new modes of integrated marine management, the new port area can improve the comprehensive competitiveness of the marine industry. In 2018, the Guiding Opinions on Promoting the Construction and Development of Marine Economic Development Demonstration Zones were issued, which was deployed to further promote the construction and development of Marine Economic Development Demonstration zones. The Guiding Opinions clearly plan to establish 10–20 demonstration zones in 2020. This paper first analyzes the shortcomings of Zhoushan Port new area. Finally, combined with Zhoushan's own conditions, this paper further puts forward the development path and countermeasures of new port area construction.

Maladjustment of β-CGRP/α-CGRP Regulation of AQP5 Promotes Alveolar Epithelial Cell Apoptosis to Pulmonary Fibrosis

Background: To explore the triggering mechanism of interstitial lung disease (ILD) by establishing the effects of immunogenic and neurogenic calcitonin gene-related peptide (CGRP) imbalance on the regulation of AQP5 expression and the repair responses to promote alveolar epithelial cell (AEC) apoptosis in pulmonary fibrosis. Methods: Newly diagnosed ILD patients (n=60) were enrolled, whoseserological levels of β-CGRP, α-CGRP, AQP5, RAMP1, and RCP were detected by ELISA. Th1 and Th2 cytokines and CD4+ and CD8+ cells were measured by flow cytometry method (FCM). In vivo, bleomycin (BLM) was set for modeling pulmonary fibrosis. The CALCA-HET model was set as a chronic pulmonary fibrosis model. Hematoxylin-eosin (H&E), immunohistochemistry, Masson's trichrome staining, and TUNEL staining was performed to assess the role of apoptosis in the injured lung. The concentrations of cytokines were determined by cytokine antibody arrays. Results: Abnormal activation of serological CD4+T lymphocytes and predominant Th2 response was established in patients with ILD. Moreover, the ratio of β-CGRP/α-CGRP was positively correlated with the increased level of AQP5 in patients with ILD. In vivo, a significant increase of AQP5 and β-CGRP at the chronic stage of pulmonary fibrosis induced by bleomycin in mice model, whereas the expression of AQP5 protein was the generally decreased in the acute alveolitis phase. Moreover, the levels of AQP5 and α-CGRP in the CALCA-HET rats were elevated. The high ratio βCGRP/α-CGRP enhanced the expression of AQP5, inhibited TGFβ1/PSmad1/Smad4 pathway, and upregulated NRF2 signal, whereas the apoptosis of alveolar epithelial cells was significantly reduced in late-stage pulmonary fibrosis. Conclusions: The high ratio of β-CGRP/α-CGRP induced predominant Th2 response and promoted AEC apoptosis through inactivation of the TGFβ1/smad1 signaling pathway and upregulation of the Nrf2 signaling in the chronic stage of pulmonary fibrosis. Funding Statement: This work was financially supported by the National Natural Science Foundation of China (no.81800070 to Xiaoting Lv and no.81871293, no.81571613 to Qicai Liu), the Joint Fund for Program of Science innovation of Fujian Province (no.2016Y9011 to Feng Gao), the Sail Foundation of Fujian Medical University (no.2016QH063 to Xiaoting Lv). Declaration of Interests: The authors have no competing interests to declare. Ethics Approval Statement: This study was approved by the Medical Ethics Committee of the First Affiliated Hospital of Fujian Medical University (no. [2016]156). Consent for participation and publication the case reports was obtained. The animal experiment was approved by the Experimentation Ethics Committee on Animal Rights Protection of Fujian Medical University Animal Experiment Center (Fujian, China). During the experiments, the animals were treated in compliance with the “Guiding Opinions on the Ethical Treatments of Laboratory Animals” published by the Ministry of Science and Technology in 2006. All procedures strictly followed the National Institutes of Health guidelines for the care and use of laboratory animals.

Rural area government purchases “safe drinking water project” obstruction and sustainable planning

When we open the webpage to search for “China Water Resources”, we can see such a data: China’s total freshwater resources account for 6% of the world’s total freshwater resources, and its per capita possession is only 2,400 cubic meters, which is 13 poverty-stricken waters worldwide. One of the countries. China is a country with extremely scarce water resources. Water has always been one of the important factors in urban and rural construction. With the rapid development of the national economy, the shortage of water resources has increasingly become a problem. In 2002, China launched a large-scale South-to-North Water Transfer Project, which solved the water problem of more than 400 million urban populations, and the urban water use plan has become more perfect. The “Guiding Opinions on Improving the Living Environment of Rural Areas” (2014) pointed out that by 2020, the basic conditions of rural housing, drinking water and travel in the country have improved significantly, and the problem of safe drinking water in rural areas has gradually entered the public management line of sight. However, in rural areas, especially in remote mountainous areas, lack of water resources, scattered living, and limited infrastructure construction funds, it is not only difficult to achieve centralized water supply, but also trigger a series of grassroots disputes. It is hoped that by analyzing the implementation effect of the “safe drinking water project”, exploring the difficulties and obstructions of rural water resources development, in-depth “anatomy” of the problem, clarifying the “pathogenic source”, in order to solve the problem, and strive to reduce ecological damage on the basis of sustainable development. Rationally plan and use water resources to achieve smooth progress in rural safe drinking water projects.

Research and practice of "internet + hydrological monitoring" of the Yangtze River

In 2015, China issued the “Guiding Opinions on Actively Promoting “Internet+” Actions”, and implemented a top-level design for the implementation of the “Internet+” action plan for all walks of life. The essence of "Internet +" is connectivity, and it is a cross-border integration. This paper explores how to effectively integrate traditional Internet monitoring with Internet technologies such as mobile Internet, cloud computing, and big data to solve the “inefficient point” of traditional hydrological monitoring, and to achieve sustainable development of the hydrological industry and meet various economic and social fields.

Discussion on the concept and definition of mine water

The definition of mine water related concepts involves 6 relevant standards in 6 sectors, 2 mandatory standards, 3 recommended standards, and 1 industry standard. Multi-sectors are inconsistent in the concept and definition of statistical caliber, and the concept of policy is confusing during the formulation and implementation of relevant policy documents, resulting in large errors in statistical data. This paper is based on the analysis of the concept of mine water and the integration of doubts. In conjunction with the relevant requirements of the “Guiding Opinions of the Ministry of Water Resources on the Unconventional Water Sources incorporated into the Unified Allocation of Water Resources”, Conceptual definition of regular mine water quantity, mine water availability, mine water development and utilization, and mine water development and utilization potential, unify the statistical caliber of each department and minimize the difference in statistical data. It is conducive to water resources investigation and management, which are conducive to the integration of unconventional water resources into water resources, alleviating the contradiction between water supply and demand, and improving regional water resource allocation efficiency and utilization efficiency.

Political involvement and firm performance — Chinese setting and cross-country evidence

This paper examines the effect of political involvement on firm performance in Chinese and cross-country setting. We find that political involvement is negatively correlated with firm performance in China and the negative effect in China is stronger than that in other countries. Cross-sectional tests indicate that the negative effect is not affected by cross-listing, stronger in local Stated Owned enterprises (SOEs) and disappears after the issue of Guiding opinions and Several opinions. Our additional analyses show that the degree of overlapping between members of the Party Committee and directors has a converted U-shape relationship with firm performance. The ratio of Chinese Communist Party members in the board of directors has positive impact on firm performance and political involvement is positively correlated with firm performance in NSOEs.

Study on the Integration of Socialist Core Values into College Student Organization Construction - On the Basis of Some College Student Organization Bureaucracy Prevailing Reflection

In recent years, the importance of cultivating and practicing socialist core values has become increasingly prominent. The main contents of socialist core values are prosperity, democracy, civilization, harmony, freedom, equality, justice, the rule of law, patriotism, dedication, integrity and friendship. With the promulgation and implementation of the Guiding Opinions on Further Integrating Socialist Core Values into the Construction of the Rule of Law, how to integrate the core values into all aspects of social governance has attracted extensive attention from all sectors of society. The integration of socialist core values into the construction of college student organization is an indispensable key to the education work of university ideology and politics. College student organization is an important place to guide students to consciously establish and practice socialist core values. However, the phenomenon of its prevailing bureaucracy reflects many problems, such as insufficient guiding force for socialist core values, imbalance of guiding mechanism and deviation of guiding direction. Therefore, starting from strengthening the unified leadership of the party and effective guidance of the league organization, optimizing the design of the dual mechanism of education guidance and interest guidance, and improving the rules and regulations of student organization management, is a feasible way to promote the effective integration of socialist core values into the construction of college student organization. For scholars in the academic field, it is necessary to integrate socialist core values into the micro field of grassroots governance to ensure the feasibility of research strategies. For thought education workers, the daily thought of student organization education needs to be strengthened to ensure that socialist core values can be integrated into theoretical study and work development.

Leonurine Negatively Modulates T Cells Activity By Suppressing RAG2 in Lung Fibrosis

Background: The key transformed T cells transcription factor RAG2 is regulated during inflammation to allow for the acquisition of effector T cells functions. Here, the present study was designed to investigate whether stress signals elicited by leonurine (LEO) could lead to the degradation of RAG2 through AKT signal in lung fibrosis. Methods: There were 40 female mice randomly divided into 5 groups (Group I-V): Normal group, Bleomycin (BLM), BLM LEO 50mg/kg/d, BLM LEO100mg/kg/d and BLM LEO50mg/kg/d LY294002. At 7, 14 and 28 days after modeling, pathomorphological, apoptosis, CD3 T cells, the expression of RAG2, TGFβ1 and AKT signal were detected by immunohistochemistry or western blot. Findings: Our results demonstrated T lymphocytes were reduced sharply in leonurine treated mice compared with other groups. Besides, AKT signal was greatly inhibited in BLM group and activated with leonurine treatment in Group III-IV, especially at 14th day. In addition, RAG2 was attunuated by leonurine on the 14th day- and 28th day-mold mice. Remarkably, the high-dose of leonurine did not have greater protective efficacy compared with the low-dose group of leonurine in degrees of pulmonary fibrosis, T cells inactivation and apoptosis in alveolar cells. The best dose-effect of LEO was attained in 50mg/kg/d in pulmonary fibrosis. Interpretation: The critical role of leonurine in promoting T cells inactivation by suppressing RAG2 may provide a potential therapeutic target for the intervention against pulmonary fibrosis. Funding Statement: This work was financially supported by the National Natural Science Foundation of China (no.81800070 to Xiaoting Lv and no.81871293 to Qicai Liu), the Nursery Foundation of Fujian Medical University (no.2015MP026 to Xiaoting Lv) and a grant from the Sail Foundation of Fujian Medical University (no.2016QH063 to Xiaoting Lv). Youth Research Fund Project of Fujian Provincial Health and Family Planning Commission (no.2017-1-43 to Yongping Zhu). Declaration of Interests: The authors have no competing interests to declare. Ethics Approval Statement: This animal experiment was approved by the Experimentation Ethics Committee on Animal Rights Protection of Fujian Medical University. During the experiments, the animals were treated in compliance with the “Guiding Opinions on the Ethical Treatments of Laboratory Animals” published by the Ministry of Science and Technology in 2006. All procedures strictly followed the National Institutes of Health guidelines for the care and use of laboratory animals.

Comment on “The Current Wave of State Enterprise Reform in China: A Preliminary Appraisal”

Comment on “The Current Wave of State Enterprise Reform in China: A Preliminary Appraisal”

Collaborative Design and Innovative Management—The Experience of Sponge City Development in the Eastern New District of Wenling City

In current sponge city development, the question of how to implement plans according to local circumstances and the Guiding Opinions on Promoting Sponge City Development, issued in October 2015 by the State Council, has become a hot topic. Starting with urban development in 2010, the Eastern New District of Wenling City, Zhejiang Province has taken the lead in building an early phase of green infrastructure that centers on “water” to establish a complete framework of urban ecological development and carry out various practices of city-wide stormwater management systematically. This article summarizes the practical experiences and conceptual procedures of developers, urban administrative agencies, contractors, landscape architects, and other people who are directly related to the development of this sponge city. It is believed that the prioritized planning of green infrastructure, the boldness to be a pioneer, the systematic solutions, and the proper execution of tactful management are the fundamental reasons for the successful implementation results.

Independent Directors: Decision-Makers in the us, Powerless Advisers in China

As a global popular corporate governance system developed in the us, independent directors were officially adopted by China through ‘Guiding Opinions on the Establishment of Systems of Independent Directors by Listed Companies’ (hereinafter Independent Directors Opinion) in 2001 and through Article 123 of Company Law when it was amended in 2005. The emphasis on minority shareholders’ protection by adopting independent directors in China can be attributed to the global influence of the American corporate governance model, which depends on disinterested directors as independent decision-makers. However, with more than 10 years having passed, independent directors serve as powerless advisers rather than decision-makers in China. Accordingly, this paper aims to ascertain some profound reasons for powerless advisers in China and provide recommendations to address this problem by comparing the role of independent directors in China and the us.

Challenges Ahead in China’s Reform of State-Owned Enterprises

The reform of state-owned enterprises (SOE) is an urgent priority for the Xi Jinping administration. Economically, Beijing aims to decrease the drag on domestic growth and increase the overseas competitiveness of its largest firms known as yangqi, long plagued by declining performance, rising debt, and serious corruption.1 Politically, the Chinese Communist Party wants to reinforce state ownership as a pillar of domestic stability at home and increased influence abroad. To achieve these ends, Beijing released the long-delayed Guiding Opinions of the Communist Party of China Central Committee and the State Council on Deepening the Reform of State-Owned Enterprises in September 2015, to be followed by a series of detailed policy documents.2 This roadmap calls for regrouping state firms by function; further consolidating their assets, while simultaneously developing mixed ownership; and loosening state authority over executive management, especially for those in nonstrategic sectors.3Categorizing SOEs into a public class (gongyilei) and a commercial class (shangyelei) is a transformative move at the heart of the new reforms. Firms will be divided by function into those dedicated to public welfare and those seeking profit. Future reforms will be carried out separately for these two groups in a dual-track approach: distinct strategic objectives will be set for each, and their performance will be evaluated by different metrics. While Beijing seeks to improve all SOEs' operational efficiency, service quality, and ability to innovate, profitability will always be a secondary priority for those charged with public welfare or national security functions. Specifically, the new guidelines stipulate that firms designated as public will be assessed by their ability to control costs, the quality of their goods and services, and the stability and efficiency of their operations.4 Political rather than market logic will therefore remain the paramount driver of changes to state firms in the public class. In contrast, boosting market competitiveness and delivering gains in financial performance will be a top priority for SOEs classified as commercial, to be assessed by indicators such as economic value added.5 However, these firms will still serve political goals, including fostering indigenous innovation, supporting social stability and crisis response in China, and advancing economic initiatives abroad such as Belt, One Road.This essay analyzes three challenges confronting this reform agenda: determining how and when to grant market forces a greater role, especially for state firms designated as commercial; aligning mismatched managerial interests and incentives; and overcoming complicating factors within companies. First, continuing government-directed mergers while restricting competition in protected sectors will boost state firms' market share at the risk of deepening their financial and operational weaknesses in the long term. Second, while the Xi administration is actively exercising personnel control, defined as the authority to appoint and remove top company leaders, shuffling executives cannot eliminate their mismatched incentives.6 Finally, the size, complexity, and cadre culture of SOEs will complicate reform implementation. Whether these difficulties can be surmounted will ultimately determine the success of Xi's reform agenda and China's economic transformation.CENTRAL STATE-OWNED ENTERPRISESChina's state-owned economy remains significant today. State firms' exact contribution to industrial output is debated but has been estimated at between 25% and 30%.7 State firms continue to enjoy advantages in obtaining bank loans and regulatory approvals, even if their privileged capital access has gradually declined. The central government currently owns 106 companies, out of which 47 firms ranked in the 2014 Fortune Global 500.8 These centrally owned firms, or yangqi, controlled more than $5.6 trillion in assets at the end of 2013, including more than $690 billion abroad. …