Year: at the second session of the 6th CPPCC National Committee held in 1984

Proposal No: 0158

Proposer: CPPCC National Committee member Xu Zhihe

Content: 

I propose the following reforms to the existing industrial management system: 

1. Cut the cord between government functions and business operations, so that businesses take full responsibility for their own profits and losses. 

2. Establish various forms of companies through reshuffles and mergers and allow them to become economic entities that directly report to the State. As an economic entity that directly reports to the State, a company carries out independent accounting and takes responsibility for its own profits and losses. It pays taxes to the State and the after-tax profits are distributed to the company’s shareholders. The company implements a dual-track accounting system and stakeholders have certain autonomous rights. The State leads and manages the company through policies, directives, plans and economic vehicles such as tax, credit, prices and supplies. Only when necessary should administrative intervention be carried out. 

3. The company controls independent business units (e.g. independent factories that are not part of the company) through loose incorporation or long-term partnerships. 

4. Establish industry associations to manage the industry. Big companies should play a leading role in this process.    

The reforms should be carried out in the following steps: 

1. Existing national industrial authorities no longer directly administrate companies, which shall fall into the custody of local industrial management agencies on a temporary basis. National industrial authorities are responsible for drawing up plans for industrial reorganization. Unnecessary divisions and personnel are to be cut during this process and those left are to be merged into a few government departments. 

2. Establish various types of companies through reshuffles and mergers. The local government is no longer responsible for managing units owned by companies, which are to be managed by the companies themselves. Local industry agencies are to be merged into a few industry bureaus.

3. Establish loose alliances and long-term partnerships, and create industry associations. The above reforms are to be completed during the Seventh Five-Year Plan (1986-90) period.