Briefing Paper

Lessons for Africa in Chinese SOE Governance

China’s state-owned enterprise (SOE) sector is vast and diverse. There are more SOEs in China than companies of all kinds in most African countries, and China’s state sector produces more and has grown faster than sub-Saharan Africa’s entire economy. China’s SOEs have gone through four waves of reform, roughly once per decade. Common themes have been the use of market competition within state ownership; increased operational autonomy alongside multi-faceted governance, using both capital markets and evolving state institutions; and high-cost compensation, formal and informal, for those affected, far beyond the facades of training programmes. Countries in Africa seeking to learn from China’s experience should note that state building preceded and continued alongside the reform of state ownership, and was necessary for the state to harness markets to its purposes. However, opportunities for state building and reform at scale are rare, and several tactical lessons can be learned in the interim. Those include the use of quality global exchanges and strategic investors in listings; dividing easily separable SOEs into competing units, even if still all state-owned; structuring reporting lines carefully; and laying the political preconditions of continued action in each round of reform. The ultimate lesson is to see SOE governance as an evolving system, requiring continuous learning and little dogma.