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The 2012 annual reports of listed central stateowned enterprises （SOEs）—or enterprises administered by a national state-owned assets supervisory body—revealed that some of them suffered heavy losses， which has aroused public concern and put these companies under greater scrutiny. Of course， losses should be tackled promptly， but in a rational way.
Some people believe losses originate from inefficiency and that all existing SOEs should be privatized as a result. This idea is meaningless. Reviewing the development history of SOEs in the past three decades， the last 10 years in particular， SOEs are sufficiently qualified to develop themselves in market competition， and their accomplishments are there for all to see.
While losses don’t necessarily derive from state ownership， it doesn’t mean SOEs can stand by and do nothing. Indeed， it is natural for enterprises to seek expansion. However， being bigger means more use of resources and higher costs. Enterprises have to pay those costs with the money they earn. In other words， costs are certain while profits are uncertain. When costs exceed profits， losses are inevitable.
For this reason， central SOEs should take cost and profit into consideration in their expansion plans， especially regarding mergers and acquisitions. It takes money to acquire a company. And since it is difficult to say whether the company can yield profits， central SOEs should be cautious with their decisions.
Central SOEs have their advantages， but it doesn’t mean they are omnipotent. Efficiency， instead of scale， should be given top priority when central SOEs are reorganized with mergers and acquisitions.
At the same time， central SOEs should also act in line with the law of corporate development. The essence of a business can be reflected in three aspects. First， it should try to meet market demands. If a company loses its customers， it will go bust. That means what it should keep in mind are who its customers are， who its customers should be， and who its customers will become. Second， it should make money. Third， it needs to fulfill corporate social responsibility. That means a company should spare no effort to eliminate all the negative effects of its production and operation， participate in market competition on an equal basis， and respect laws and regulations.
When a company does a good job on these three fronts， its true value can shine through. Currently， SOEs have to play too many roles， some of which go beyond the functions of an enterprise. The consequences are an increased burden and have twisted business behaviors. An enterprise cannot focus on its own business if it is given tasks that are beyond the scope of its functions.
When some central SOEs are in the red， they tend to take all possible measures to reverse losses， but it is essential to comply with the law of corporate development and clearly recognize the purpose of central SOEs.
Some people believe losses originate from inefficiency and that all existing SOEs should be privatized as a result. This idea is meaningless. Reviewing the development history of SOEs in the past three decades， the last 10 years in particular， SOEs are sufficiently qualified to develop themselves in market competition， and their accomplishments are there for all to see.
While losses don’t necessarily derive from state ownership， it doesn’t mean SOEs can stand by and do nothing. Indeed， it is natural for enterprises to seek expansion. However， being bigger means more use of resources and higher costs. Enterprises have to pay those costs with the money they earn. In other words， costs are certain while profits are uncertain. When costs exceed profits， losses are inevitable.
For this reason， central SOEs should take cost and profit into consideration in their expansion plans， especially regarding mergers and acquisitions. It takes money to acquire a company. And since it is difficult to say whether the company can yield profits， central SOEs should be cautious with their decisions.
Central SOEs have their advantages， but it doesn’t mean they are omnipotent. Efficiency， instead of scale， should be given top priority when central SOEs are reorganized with mergers and acquisitions.
At the same time， central SOEs should also act in line with the law of corporate development. The essence of a business can be reflected in three aspects. First， it should try to meet market demands. If a company loses its customers， it will go bust. That means what it should keep in mind are who its customers are， who its customers should be， and who its customers will become. Second， it should make money. Third， it needs to fulfill corporate social responsibility. That means a company should spare no effort to eliminate all the negative effects of its production and operation， participate in market competition on an equal basis， and respect laws and regulations.
When a company does a good job on these three fronts， its true value can shine through. Currently， SOEs have to play too many roles， some of which go beyond the functions of an enterprise. The consequences are an increased burden and have twisted business behaviors. An enterprise cannot focus on its own business if it is given tasks that are beyond the scope of its functions.
When some central SOEs are in the red， they tend to take all possible measures to reverse losses， but it is essential to comply with the law of corporate development and clearly recognize the purpose of central SOEs.