Advance and retreat : the new two-pronged strategy of enterprise reform in China

During the Fourth Plenum of the Fifteenth Party Congress in September 1999, the Central Committee of the Chinese Communist Party (CCP) passed a Resolution on State Enterprise Reform that was replete with contradictions. It emphasized the significance of the state sector in China's economy, but promised to privatize state-owned enterprises faster (SOEs). It vowed to separate politics and enterprise, but asserted the importance of' Party control over SOEs. It pledged to "magnify'' (fangda) the role of state investments, while deeming it desirable to reduce the state sector's share in the economy. The resolution proposed a two-pronged strategy. First, debt-equity swaps (zhaizhuangu, or shares-for-loans) would turn around the debt-ridden state-owned enterprises. Second, new capital to finance enterprise restructuring would be raised by converting more SOEs into shareholding corporations and reducing the number of state shares in those that were already corporatized.