A worker installs components on the assembly line of state-owned new energy vehicle brand Voyah in Wuhan, Hubei Province, on 9 April (XINHUA)

The governance of state-owned enterprises (SOEs) has long been central to political and institutional economic debates. Critics often associate SOEs with inefficiency, rent-seeking and dogma, treating them as relics of command economies. Yet in many developmental states, they have been engines of industrialisation, technological progress and national resilience. China provides perhaps the most striking example. Its SOEs have survived and evolved, some becoming globally competitive multinationals in energy, infrastructure and telecommunications. 

Chinese President Xi Jinping’s writings, contained in five volumes of Xi Jinping: The Governance of China, offer a distinctive theorisation of this evolution. They are not simply management manuals, but reflections on the purpose, governance, and performance of the state-owned sector within a socialist market economy. Reading them sequentially reveals a clear progression. The early volumes stress reform and efficiency, the middle volumes focus on innovation and resilience, and the fifth volume combines these strands as consolidation and competitiveness. Xi codifies the experience of the past decade while calling on SOEs to rise to the global stage as world-class enterprises. 

Xi’s writings demonstrate a consistent effort to address these dilemmas. His solution is not privatisation, but redefinition: reshaping the mandate, modernising governance and broadening performance metrics. The aim is to transform SOEs into developmental institutions. They are not simply businesses, but strategic instruments of China’s journey from reform to competitiveness. 

Efficiency and reform 

Xi identified weaknesses that had long plagued the state-owned sector in Volumes I and II. Overcapacity, low returns and bureaucratic slack had undermined efficiency. He promoted supply-side structural reform to reduce transaction costs and cut excess capacity in heavy industry. He encouraged mixed-ownership reform to bring private capital and market discipline into state firms. 

At this stage, performance was measured primarily in financial terms. SOEs were expected to raise returns on assets and modernise their management structures. Xi aimed to eliminate rent-seeking and inefficiency by embedding SOEs in corporate governance practices. The first step was reforming the state-owned sector to function competitively within a socialist market economy. 

Innovation and resilience 

As China entered a more turbulent global environment, Xi’s emphasis shifted. He called on SOEs to lead in strategic emerging industries in Volumes III and IV. He noted that they must invest in semiconductors, renewable energy and advanced manufacturing areas, where markets are prone to underinvestment due to risk and uncertainty. SOEs were also cast as stabilisers. During the COVID-19 pandemic, they maintained essential supply chains, supported health care provision and safeguarded energy supplies. In this way, they absorbed shocks that might otherwise have paralysed the economy. 

At this stage, performance expectations widened. Profitability remained important, but SOEs were now judged by their role in driving innovation and ensuring resilience. This shift reflected a broader developmental mandate. The state-owned sector was tasked with correcting market failures, securing sovereignty and providing insurance against systemic risks. This was the second step in the journey from reform to competitiveness. 

Comprehensive theory 

The fifth volume consolidates these themes into a comprehensive theory. Xi not only celebrates achievements, but also candidly diagnoses weaknesses. He notes that the market system still needs improvement, the relationship between state and market requires further clarification, and that innovation capacity falls short of the requirements for high-quality development. He highlights over-reliance on foreign core technologies, fragility in agriculture, wide regional gaps and weak links in well-being and environmental protection.  

In his account, these imbalances are vulnerabilities. Left unaddressed, they risk becoming “black swan” or “grey rhino” events that could derail development. Comprehensive reform is required to seize opportunities and guard against crises. SOE reform is central to this strategy. Xi calls for enterprises to become stronger, better and bigger. He demands optimisation of the state-owned sector, restructuring to enhance competitiveness and the building of world-class firms. He stresses that they must operate with modern corporate governance with Chinese characteristics, combining professional management with Party leadership. 

In the Report to the 20th National Congress of the Communist Party of China, Xi noted, “We will deepen reform of state-owned capital and state-owned enterprises; accelerate efforts to improve the configuration of the state-owned sector and adjust its structure; work to see state-owned capital and enterprises get stronger, do better, and grow bigger; and enhance the core competitiveness of SOEs.” 

Here, governance, innovation and performance converge. SOEs are to be judged on financial returns and their developmental contributions: technological breakthroughs, supply chain resilience, regional balance and ecological stewardship. This formulation treats rent-seeking and inefficiency as existential threats to the sector’s legitimacy. The antidote is effective governance and innovation-led performance. 

Global competitiveness 

The result of this progression is that Chinese SOEs have not just survived - they have grown into globally competitive multinationals. Firms such as State Grid Corp., Sinopec, COSCO Shipping Corp. and China Railway Construction Corp. demonstrate the capacity of the state-owned sector to compete at the highest levels. They have achieved this not by clinging to dogma but by pursuing innovation, upgrading governance and aligning performance with strategic priorities.  

This trajectory embodies the story of reform-driven competitiveness. What began as a campaign to improve efficiency has evolved into a strategy of building world-class enterprises. Chinese SOEs today are national champions and actors on the global stage, competing and cooperating across markets worldwide. 

From a Global South perspective, this story is instructive. Many developing countries struggle with reforming state-owned enterprises that are inefficient yet indispensable. The Chinese case suggests that privatisation is not the only path. With continuous reform, innovation and effective governance, SOEs can be transformed into developmental engines and competitive multinationals. 

It is refreshing to read Xi’s reflections in a world where many leaders focus on militarism or hegemonic manoeuvres. His writings remind us that developmental statecraft, grounded in cooperation and solidarity, remains possible. Thinking, he demonstrates, is an essential leadership competence. Leaders who labour in the realm of ideas are often those who make better decisions for the state and society.  

In a world often short of ideas, it is important and refreshing to read a political text that dwells on governance, innovation and performance. Xi’s reflections remind us that state-owned enterprises are not destined to stagnation. With vision and discipline, they can become instruments of national strategy. This lesson is worth serious attention for the Global South, where the governance of SOEs remains a pressing challenge.  

The author is director of Centre for Public Policy and African Studies of University of Johannesburg