Stricter rules for SOE executives

China's top legislative body released a new explanation that enforces stricter rules for executive officials at China's State-owned enterprises (SOEs), authorities revealed on Friday.

The Supreme People's Court and the Supreme People's Procuratorate clarified for the first time that employees of SOEs, especially management staff, are subject to the same rules as government officials in terms of dereliction of duty and negligence.

The explanation came after 10 years of debate among China's judicial experts on whether SOEs belong to the private or public sector and whether people who work for them should be subject to the same punishment if they are found to have abused their powers.

"There had been a lot of confusion among lower level courts and verdicts on cases of corrupt SOE officials used to vary from district to district," Han Yusheng, a criminal law professor from the Renmin University of China, told the Global Times, "Now with the new explanation, judges and lawyers have something to refer to."

Han's opinion was echoed by Hong Daode, a law professor from the China University of Political Science and Law, who told the Global Times on Saturday that despite the fact that SOEs are organized as private companies and sometimes have to compete with private corporations, many of them, such as Sinopec, are so dominant in specific industries that they function as government regulators in the field.

The new policy will cover SOEs such as banks, steel corporations and telecommunication companies, industries the government considers critical in the country's development and from which it forbids the participation of private players.

Many executives of SOEs are appointed by the central government following the same procedures the government uses to appoint officials. The special political status China's SOEs enjoy began in the era of the planned economy.

"Some government officials tried to transfer to large SOEs, believing they could avoid the strict supervision set for civil servants while enjoying the same political status," said Hong, adding that the Supreme Court and the Supreme Procuratorate are closing a loophole by releasing this explanation that seeks to prevent corruption and negligence.

"It's a warning that SOEs are no longer a 'safe harbor' for officials. As a matter of fact, these executives have been entrusted to positions so important that it's fair to say that they shoulder great responsibility and represent the government economically," said Han.