China’s Big Move: Reinventing its Enterprise System for the Future of Business and the **Modern Enterprise System with Chinese Characteristics**

Big news from Beijing: China is rolling out a game-changing plan to supercharge its businesses, known as the “Opinion on Improving the Modern Enterprise System with Chinese Characteristics”.

This isn’t just some minor tweak.

It’s a major overhaul announced by the General Office of the Central Committee (Zhongban 中办) and the General Office of the State Council (Guoban 国办) on May 26, as reported by Xinhua News Agency (Xinhuashe 新华社).

So, why the big push?

Let’s be real: China’s current enterprise system has some kinks to iron out.

Some state-owned enterprises (SOEs) are wrestling with fuzzy lines of power and responsibility in their leadership.

And many private companies could use a serious upgrade in their internal governance.

This mixed bag of management levels is holding companies back from truly scaling and getting stronger.

The goal? To transform these institutional frameworks into real productive power and top-notch corporate governance, laying a rock-solid foundation for high-quality growth.

This “Opinion” is a comprehensive playbook covering a ton of ground:

• Bolstering the Communist Party of China (CPC)’s leadership role.
• Fine-tuning corporate governance structures.
• Upping the game in scientific management.
• Sparking innovation with better incentive systems.
• Building robust social responsibility (Shehui Zeren 社会责任) and corporate culture frameworks.
• Streamlining enterprise supervision and support.

The bottom line is all about empowering enterprise development through institutional innovation.

It’s about unleashing the energy of individual companies, making them more dynamic, resilient, and globally competitive.

This is seen as crucial for China’s ambitious goals of building a strong nation and achieving national rejuvenation through its unique path to modernization.

Revving Up Corporate Governance: The Capital Market’s Key Role

The “Opinion” clearly signals that China’s capital markets are set to play a pivotal role in sharpening corporate governance.

What does this mean in practice?

• Holding Controlling Shareholders Accountable: More robust honesty obligations are coming for those at the top.
• Welcoming Active Investors: Listed companies are encouraged to bring in institutional investors holding over 5% stakes to act as active shareholders. Think more engaged, long-term partners.
• Empowering Independent Directors: The independent director system for listed firms is getting a serious upgrade. This includes establishing audit committees where independent directors are the majority and creating specialized meeting mechanisms just for them.
• Boosting Transparency: Information disclosure in listed company governance is set for an overhaul to make decision-making and management more scientific and open.

Liu Xiangdong (Liu Xiangdong 刘祥东), Chief Analyst at Dongyuan Investment (Dongyuan Touzi 东源投资), shared some sharp insights with Securities Daily (Zhengquan Ribao 证券日报).

He reckons this “Opinion” is a big deal for both optimizing corporate governance and boosting market confidence.

Here’s the breakdown from Liu:

Stronger Governance Foundations:

“By tightening the screws on controlling shareholders, bringing in active investors, and beefing up the independent director system, we’re pushing listed companies towards governance with clear roles and effective checks and balances,” Liu explained.

This, he says, makes corporate decision-making more scientific and transparent, basically laying down the systemic tracks for a healthy capital market.

Increased Market Trust:

“Improving information disclosure and how independent directors keep an eye on things directly tackles the risk of major shareholders pulling shady moves or keeping too tight a grip with insider control,” Liu added.

This is all about protecting the little guy—the small and medium investors—and making everyone trust listed companies more, which in turn fuels the market’s long-term stability.

Liu Xiangdong further elaborated on the nitty-gritty:

• Audit Committees with Clout: “Audit committees with a majority of independent directors and their own special meetings? That’s a game-changer for counterbalancing major shareholder power, preventing conflicts of interest, and ensuring big decisions are independent and professional. It’s a direct upgrade to corporate governance levels.”
• Institutional Investors as Catalysts: “Getting institutional investors to jump in as active shareholders is key. It optimizes who owns shares, steers capital towards long-term company value instead of quick flips, and really pushes listed companies towards high-quality growth.”
• Transparency as a Discipline: “Cranking up information disclosure makes company operations way more transparent. Investors can see what’s going on, creating a market-based watchdog system. This pushes companies to play by the rules and cuts down on systemic risks.”

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Fueling the Future: Turbocharging Enterprise Incentive and Innovation Systems

A key figure from the National Development and Reform Commission (NDRC) (Guojia Fazhan Gaige Wei 国家发展改革委) put it plainly: “The key to Chinese modernization is technological modernization.”

And who’s at the heart of this tech revolution?

Enterprises.

They’re the engines combining tech and industry, the crucial players driving what China calls “new quality productive forces.”

The “Opinion” dedicates a whole chapter to “Improving Enterprise Incentive Innovation Systems.”

The goal is to shift companies from just chasing scale and speed to focusing on quality and efficiency.

This is all about unlocking the innovative horsepower of businesses.

Here’s how they’re planning to do it, focusing on building an open, collaborative, and efficient innovation ecosystem:

1. Building Innovative Enterprise Structures:

   Tech innovation today is a team sport – it’s about big-picture science with clear roles, collaboration, and everyone pushing forward together.

   Company structures need to adapt.

   The “Opinion” tackles issues like scattered, duplicated, or inefficient innovation efforts.

   It’s pushing large enterprises to open up their innovation resources to small and medium-sized businesses, offering tech guidance and support for turning ideas into reality.

   It’s all about creating a powerful innovation landscape where big, medium, and small companies work together seamlessly.

2. Supercharging How Innovation Resources are Used:

   Getting the mix of production elements—like talent, tech, and capital—right is the core of these “new quality productive forces.”

   Enterprises are where this magic happens.

   The “Opinion” lays out clear paths for how these crucial resources should flow and be allocated.

   This helps companies pull together different elements, boost innovation efficiency, and truly connect the dots between the innovation chain, industrial chain, capital chain, and talent chain.

3. Strengthening Innovation-Focused Incentives:

   Talent is the rocket fuel for company innovation.

   Designing incentive systems that truly reward innovation is fundamental for companies to build a knack for non-stop creativity.

   The “Opinion” is all about encouraging long-term value creation.

   It means giving project teams real autonomy and pushing companies to use a variety of methods to amp up incentives.

   The aim is to turn talent advantages into powerful innovation momentum.

NDRC’s Action Plan for Private Enterprise Support

The NDRC isn’t just talking; they’re acting.

They plan to work with other departments to fully implement the Law on Promoting the Development of the Private Economy (Minying Jingji Cujin Fa 民营经济促进法) and this new “Opinion.”

The focus is on continuously improving support for private businesses, hitting these five key areas:

• Breaking Down Barriers & Boosting Resources:

  They’re serious about enforcing the new negative list for market access, checking how well market access is actually working, and backing private companies looking to invest in emerging and future industries.

  By getting private firms involved in major national strategies and ramping up things like equipment renewal loan subsidies, they’ll support private participation in key national projects like “Dual Focus” (Liangzhong Jianshe 两重建设) construction and “Dual New Initiatives” (Liangxin Gongzuo 两新工作).

• Settling Unpaid Bills:

  It’s time for local governments and others to pay up.

  They’ll be pushing for the effective implementation of the revised “Regulations on Ensuring Payments to Small and Medium-sized Enterprises.”

  This includes using new local government special bonds and setting up a credit supervision system for overdue payments, with real penalties for those who don’t pay on time.

• Protecting Rights, Legally:

  They plan to deeply publicize and explain the significance of the Law on Promoting the Development of the Private Economy (Minying Jingji Cujin Fa 民营经济促进法).

  The goal is to quickly build a legal framework around this law, supported by other relevant regulations, and launch special crackdowns on any law enforcement actions that unfairly target businesses.

• Keeping the Conversation Going:

  Improving regular communication with private enterprises and creating better problem-solving channels are top priorities.

  They’ll be leveraging the comprehensive service platform for private economic development to help businesses tackle real-world challenges.

• Fostering a Pro-Business Vibe:

  This involves innovating and developing the “Jinjiang Experience” (Jinjiang Jingyan 晋jiang经验), promoting the spirit of entrepreneurship (Qiyejia Jingshen 企业家精神), and making sure policies designed to help businesses overcome difficulties are actually put into action effectively.

• Barrier Reduction & Resource Boost: Enforce negative list, check market access, back investments in emerging/future industries, support participation in national projects (“Dual Focus”, “Dual New Initiatives”).
• Settling Unpaid Bills: Implement revised regulations for SMEs, use local government special bonds, establish credit supervision (penalties for non-payment).
• Legal Rights Protection: Publicize Law on Promoting Private Economy, build legal framework, crack down on unfair enforcement.
• Ongoing Communication: Improve regular communication, create problem-solving channels via comprehensive service platform.
• Pro-Business Environment: Innovate “Jinjiang Experience”, promote entrepreneurship spirit, ensure effective policy implementation.

The Grand Vision: Crafting the Modern Enterprise System with Chinese Characteristics

So, what are the big-picture goals for this “Opinion”?

• Within about 5 years: The aim is to see the widespread setup of a modern enterprise system with Chinese characteristics that truly fits China’s unique conditions and development needs, wherever feasible.
• This means Party building within enterprises will be stronger, governance structures more solid, market-oriented operations smoother, and scientific management levels higher.
• Enterprises are expected to fully step up in promoting independent innovation, supporting industrial upgrading (Chanye Shengji 产业升级), and fulfilling social responsibility (Shehui Zeren 社会责任).
• By 2035: The system should be even more perfected. Chinese enterprises are envisioned to have significantly boosted their international competitiveness, laying a strong foundation for building world-class companies.

Let’s talk numbers for a second.

According to the State Administration for Market Regulation (SAMR) (Shichang Jianguan Zongju 市场监管总局), as of the end of March 2025, China was home to over 57 million private enterprises.

The vast majority of these are small, medium, and micro-sized businesses – the backbone of the economy.

• Within ~5 Years: Widespread setup of the system; stronger Party building, solid governance, smoother market operations, higher scientific management. Enterprises actively promote innovation, industrial upgrading, social responsibility.
• By 2035: System perfected; Chinese enterprises significantly boost international competitiveness, laying foundation for world-class companies.

How Key Organizations Are Stepping Up

Different bodies are already gearing up to put the “Opinion” into practice:

The All-China Federation of Industry and Commerce (ACFIC) (Quanguo Gongshang Lian 全国工商联) is on it:

• They’re rolling out training and exchange programs for entrepreneurs and top execs to get everyone on board with why this new system is crucial for sustainable, healthy growth.
• ACFIC is also spearheading research to create “Guidelines for ACFIC Executive Committee Member Enterprises (Gongshang Lian Zhiwei Qiye 工商联执委企业) on Establishing and Improving the Modern Enterprise System with Chinese Characteristics and Promoting Enterprise Governance Modernization.”
• Pilot programs are slated for 2025 in ACFIC Executive Committee Member Enterprises at national and provincial levels, plus some city-level ones that are ready. Even county-level ACFICs with the right conditions are encouraged to jump in.
• The idea is to support these member enterprises in speeding up governance reforms and achieving healthy development, setting a strong example to inspire more private companies to adopt the system.

The State-owned Assets Supervision and Administration Commission (SASAC) (Guowuyuan Guoziguan Wei 国务院国资委) has its own game plan for state-owned enterprises under central supervision (Guozi Yangqi 国资央企):

SASAC sees this “Opinion” as a catalyst to deepen the implementation of the “Two Unwaverings” (Liangge Yiyiguanzhi 两个一以贯之) – a principle about upholding and developing socialism with Chinese characteristics and upholding the Party’s leadership.

Here’s their focus for SOEs:

1. Integrating CPC Leadership into Governance:

   They’ll be classifying and refining the list of major business management matters that need a pre-discussion and research huddle by the Party committee (leading party group) (Dangwei (Dangzu) Qianzhi Yanjiu Taolun Zhongda Jingying Guanli Shixiang Qingdan 党委（党组）前置研究讨论重大经营管理事项清单) within SOEs.

2. Elevating Corporate Governance Structures:

   This means picking and equipping a better team of external directors (Waibu Dongshi 外部董事).

   Ensuring the board of directors (Dongshihui 董事会) is truly central to decision-making.

   Properly implementing the system where the board authorizes the management layer (Jingliceng 经理层).

   Establishing a new type of operation responsibility system (Xinxing Jingying Zeren Zhi 新型经营责任制).

   The goal is to attract more top talent to SOE governance and make sure company decisions and management are more in sync with the market economy.

3. Championing the Spirit of Entrepreneurship (Qiyejia Jingshen 企业家精神):

   They’ll be improving how outstanding entrepreneurs are cultivated, selected, appointed, assessed, and evaluated, alongside enhancing material incentives and honor awards.

4. Boosting Collaboration with an Open Mind:

   SASAC wants to strengthen exchanges between SOEs and companies with other ownership structures.

   This includes sharing best practices in areas like equity/shareholding (Guanquan 股权), operations, governance, and talent, all with the aim of jointly building modern, effective enterprises.

This comprehensive strategy signals a clear intent to refine and fortify China’s economic foundations, ensuring that its enterprises, both state-owned and private, are fit for the future challenges and opportunities of the global market, all while advancing the **Modern Enterprise System with Chinese Characteristics**.

• Integrating CPC Leadership: Classifying and refining list of matters requiring Party committee discussion.
• Elevating Governance Structures: Improving external directors, centrality of board, implementing board-authorized management, establishing new operation responsibility system.
• Championing Entrepreneurship: Improving cultivation, selection, appointment, assessment, evaluation of entrepreneurs, enhancing incentives/awards.
• Boosting Collaboration: Strengthening exchanges with other ownership structures, sharing best practices (equity, operations, governance, talent).

References

• Securities Daily – Official Website
• State-owned Assets Supervision and Administration Commission of the State Council – Official Website
• National Development and Reform Commission – Official Website
• All-China Federation of Industry and Commerce – Official Website