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Samantha Kierath

It was to have been the biggest deal in Australian corporate history. In return for injecting US$19.5 billion into cash-strapped Rio Tinto, state-owned alumina producer Aluminum Corp of China (Chinalco) would have doubled its stake in the Anglo-Australian miner to 18 per cent. The deal collapsed but it represented a broader offshore push by mainland state-owned enterprises (SOEs) to secure access to natural resources. 
It also raised questions overseas about the links between the buyers and their dominant stakeholder - the government.
In their book, Asia's Turning Point - An Introduction to Asia's Dynamic Economies at the Dawn of the New Century, Ivan Tselichtchev and Philippe Debroux go a long way to addressing these questions by describing the broader economic issues  at play in China and the government's approach to enterprise development.
Overall, the book points to a decade of radical change for mainland state firms. In the late 1990s, they numbered more than 100,000 but by 2003 the figure had shrunk to just 34,000, with about half  that decline due to privatisation. 
Major SOEs were put in the hands of professional managers and profitability, company value and industry strength rose up the agenda. According to the authors, about 40 per cent of SOEs still lose money but the direction of reform is clear - most Chinese companies, including state-owned ones, are subject to market price-setting conditions and internal decisions are made by company managers rather than government ministries. 
But while the state has been moving away from commanding the planned economy to regulating the market it has retained industrial policies and 'is keen to preserve the option of administering the major sectors directly', particularly in the  car and steel industries. In terms of corporate ownership of SOEs, the state seeks to 'retain presence and control' as well as make companies competitive.
In addition, many mainland SOEs or government-linked companies like PetroChina and Lenovo Group are going global. Governments hope these companies can help make the national economy more competitive but the firms do have to rely on their own resources and answer to managers who value profitability.
Part of that global push is the rush by many mainland  firms to secure offshore sources of energy and raw materials to cope with what the authors describe as a persistent latent threat of fuel and resource supply shortage brought on by China's rapid economic growth and high rates of consumption.  Environmental degradation and natural resources combine to form  a 'super challenge'  for the world's biggest polluter.  
Three decades after the start of China's opening up and reform process, the country is at the centre of growth in East Asia. Where it goes, others follow.  
For these reasons, regional economies are also becoming China's 'hostages' - the more they rely on the mainland, the worse off they will be if  it unravels.
Samantha Kierath is a freelance writer



Global push casts light on state firms