State-Owned Asset Supervision: Capital Management and Look-Through Oversight

State-Owned Asset Supervision: Capital Management and Look-Through Oversight

Introduction

State-owned enterprises are an important material and political foundation for socialism with Chinese characteristics, and an important pillar and reliance for our party to govern and rejuvenate the country. Properly managing and utilizing state-owned assets, ensuring their preservation and appreciation, and serving national strategies are of decisive significance to the consolidation and development of socialism with Chinese characteristics. Since the reform and opening up, my country's state-owned assets supervision system has always been moving forward in exploration. The establishment of the State-owned Assets Supervision and Administration Commission of the State Council in 2003 marked the initial establishment of a centralized and unified state-owned assets supervision system in my country. However, as the market economy system continues to improve and the reform of state-owned enterprises continues to deepen, the original regulatory model that focuses on "managing enterprises" and has a strong administrative color has gradually revealed its limitations, such as the lack of separation between government and enterprises, and the lack of separation between government and capital, excessive interference in corporate business decisions, scattered regulatory focus, and difficulty in focusing on the overall efficiency and strategic layout of state-owned capital. These problems have inhibited the vitality and creativity of enterprises as market entities.

The 18th National Congress of the Communist Party of China has embarked on a new journey of comprehensively deepening reforms, and the reform of the state-owned assets supervision system has also ushered in new historical opportunities. The Third Plenary Session of the 18th Central Committee of the Communist Party of China, "The Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening Reforms" clearly stated that "improve the state-owned assets management system and strengthen the supervision of state-owned assets with a focus on capital management", which has become the logical starting point and core direction of a new round of state-owned assets and state-owned enterprise reforms. This change requires state-owned assets regulatory agencies to transform from "stewards" to "shareholders", pay more attention to fulfilling investor responsibilities through corporate governance structures, and pay more attention to the overall layout, flow optimization and value enhancement of state-owned capital.

However, "mainly managing capital" does not mean letting things go their own way. While streamlining administration and delegating power to stimulate corporate vitality, how to effectively prevent the loss of state-owned assets and prevent and resolve major risks has always been the bottom line requirement for state-owned assets supervision. Especially in the context of the current complex and severe economic situation at home and abroad, the increasingly large organizational structure of state-owned enterprises, the continuous extension of business chains, and the interweaving and overlapping of financial risks and industrial risks, it is difficult to comprehensively, timely and accurately grasp the true operating conditions and potential risk points of enterprises by relying solely on traditional macro-supervision based on consolidated statements. Some companies may hide risks through complex equity structures, on- and off-balance sheet businesses, related transactions, etc., creating regulatory blind spots.

The Third Plenary Session of the 20th Central Committee of the Communist Party of China clearly stated the need to "improve the state-owned assets management system and supervision mechanism."

Against this background, the concept of “penetrating supervision” emerged as the times require and has been put on an important agenda by regulators. It emphasizes substance over form and requires supervisory forces to "penetrate" the surface structure of enterprises, directly access underlying assets, identify ultimate beneficiaries, and clarify true risk exposures, thereby achieving more precise, more substantive, and more effective supervision. In the face of profound changes in the regulatory system, state-owned enterprises themselves must also proactively adapt, take active actions, and carry out profound self-adjustment, transformation and upgrading. This article will follow the evolution from "capital management as the main focus" to "penetrating supervision", conduct an in-depth analysis of it, and explore how state-owned enterprises should respond.

1. “Capital management first”: the logical starting point and practical deepening of reform

“Managing capital first” is the core principle of the reform of the state-owned assets supervision system in the new era, which is the abandonment and transcendence of the traditional “managing enterprises” model.

(1) Reform background and theoretical logic

1. Requirements for market-oriented reform: The establishment of a sound socialist market economic system requires state-owned enterprises to truly become market entities that operate independently, are responsible for their own profits and losses, self-development, and self-discipline. This requires clarifying the relationship between the government and the market and the government and enterprises, reducing administrative intervention, and allowing the market to play a decisive role in resource allocation.

2. Return of investor responsibilities: The fundamental responsibility of state-owned assets supervision agencies is to perform investor responsibilities on behalf of the country. Focusing on "capital management" is the embodiment of returning to the position of an investor, that is, mainly through capital ties and relying on the corporate governance structure, it exercises shareholder rights over invested enterprises and pays attention to capital investment direction, capital operation and capital returns. International experience can also be used for reference, such as Singapore's Temasek model. As an active shareholder, it mainly exercises its rights at the board of directors level and combines advanced information risk management and control methods to achieve effective management and value enhancement of its affiliated companies. This governance-based management and control rather than direct administrative intervention is similar to my country's promotion of the "two types of companies" reform and strengthening of its shareholder responsibilities as a market-oriented operation platform.

3. Top-level policy design: The Third Plenary Session of the 18th CPC Central Committee formally established the direction of “mainly managing capital”. Subsequently, the 2015 "Guiding Opinions on Deepening the Reform of State-owned Enterprises" and a series of supporting documents ("1+N" system) systematically deployed the reform and clarified key measures such as the reorganization and establishment of state-owned capital investment and operating companies ("two types of companies").

Table 1: Key nodes and policy evolution in the reform of the state-owned assets supervision system

(2) The core connotation of “capital management”

1. The object of supervision has changed from directly supervising individual "enterprises" to supervising the form, layout and flow of state-owned "capital".

2. Change in supervision methods: from mainly administrative means to more market-oriented and legal methods, through company articles of association and corporate governance structure (especially the board of directors).

3. Supervision focus changes: focus on managing capital layout (serving national strategy, optimizing structure), standardizing capital operations (mergers and acquisitions, listing financing, property rights transfer), improving capital returns (economic benefits, efficiency indicators), and maintaining capital security (risk prevention and control, preventing losses).

4. Adjustment of the relationship between powers and responsibilities: The State-owned Assets Supervision and Administration Commission exercises shareholder rights in accordance with the law on the invested enterprises and implements the responsibility of maintaining and increasing value; enterprises enjoy operational autonomy in accordance with the law and assume the responsibilities of market entities. The State-owned Assets Supervision and Administration Commission granted some investor rights to "two types of companies" and other enterprises to build an authorized operation system.

(3) Practical paths and exploration

1. Transformation of the functions of the State-owned Assets Supervision and Administration Commission: significantly streamline regulatory matters, cancel, delegate, and authorize a number of powers, clean up normative documents, and strengthen core functions such as strategic planning, capital operations, income management, and supervision and accountability. Establish a list of supervisory powers and responsibilities.

2. Reorganize and establish “two types of companies”: Reorganize or establish some state-owned enterprises into state-owned capital investment companies and state-owned capital operating companies, as a professional platform for the market-oriented operation of state-owned capital, to achieve the separation of state-owned capital ownership and enterprise management rights. The "two types of companies" independently carry out investment and financing, industrial cultivation, capital integration, etc. with state-owned capital within the scope of authorization, and the State-owned Assets Supervision and Administration Commission assesses and supervises them.

3. Improve the company's corporate governance structure: Emphasize the construction of a modern enterprise system with Chinese characteristics and unify strengthening the party's leadership and improving corporate governance. Standardize the construction of the board of directors and implement the board of directors' powers, especially the right to make mid- and long-term development decisions, the right to select and hire managers, the right to perform performance appraisal, and the right to manage compensation, etc. Give full play to the supervisory role of the board of supervisors (or disciplinary inspection, audit, etc.).

4. Optimize the layout of state-owned capital: Focus on national strategic needs, promote the concentration of state-owned capital in important industries and key areas related to national security, the lifeline of the national economy, and the national economy and people's livelihood, and to forward-looking strategic emerging industries. Enhance industrial concentration and core competitiveness through professional integration, mergers, acquisitions and reorganizations.

5. Implement classified reforms and classified supervision: According to the functional positioning of state-owned enterprises in the national economy (public welfare, commercial), implement differentiated reform goals, development paths, assessment standards and supervision methods.

5. Improve the state-owned capital operating budget system: standardize the collection, expenditure and management of state-owned capital income, and use it more to solve historical problems, support the reform and development of state-owned enterprises, ensure and improve people's livelihood and supplement social security funds.

(4) Phased results and challenges faced

1. Achievements: The "capital management first" reform has effectively stimulated the vitality of state-owned enterprises and improved operational efficiency; the layout structure of state-owned capital has continued to be optimized, and the ability to serve national strategies has been enhanced; the modern enterprise system has been continuously improved, and the market-oriented operating mechanism has gradually been improved; positive progress has been made in the separation of government and enterprise, and the separation of government and capital.

2. Challenge:

The problem of balancing authorization and supervision: How to decentralize power and invigorate the economy while ensuring that supervision is in place, risks are controllable, and preventing "chaos when delegating power" is an ongoing challenge.

The role of “two types of companies” comes into play: The functional positioning of some “two types of companies” needs to be further clarified, their operating models need to be improved, and their market-oriented operation capabilities need to be improved.

Effectiveness of corporate governance: The role of the board of directors of some companies is still insufficient, and problems such as insider control and formal governance still exist. The specific mechanism for integrating party leadership into corporate governance needs to be continuously explored and improved.

Information asymmetry: As the representative of investors, there is a natural information asymmetry between the State-owned Assets Supervision and Administration Commission and state-owned enterprises with many levels, which increases the difficulty of precise supervision.

Deep risk identification capabilities: It is difficult for traditional supervision methods to penetrate complex group structures and financial instruments, and the ability to identify and provide early warning for potential, cross-level, and hidden risks is insufficient.

2. “Penetrating Supervision”: Risk-driven and Supervision Deepening

"Penetrating supervision" is not a brand-new, independent supervision system, but an inevitable requirement for the deepening and improvement of the principle of "mainly managing capital" in practice. It is a key measure to deal with risk challenges under the new situation. Its rise directly stems from the inherent need for a balance between authorization and supervision after the "capital management" reform, the risk of traditional supervision failure brought about by the complexity of state-owned enterprise grouping, the prevention and control pressure brought by the economic downturn and the evolution of risk patterns, the comprehensive improvement of compliance management requirements, and the development of regulatory technology and other factors.

(1) Proposed background and driving force

1. The inherent demand for “capital management” reform: Under the authorized operation system, decentralization means the downward shift of risk control responsibilities. State-owned assets regulatory agencies need new means to ensure that even if powers are decentralized, risks are still controllable and the bottom line of state-owned assets safety is not breached.

2. The groupization and complexity of state-owned enterprises: Many large state-owned enterprises have developed into complex groups with multiple levels, long chains, and wide businesses (integration of industry and finance, domestic and overseas integration). The traditional supervision based on legal entities and consolidated statements cannot cover all risk points, especially the operating risks, debt risks, compliance risks of subsidiaries, subsidiary companies and even deeper levels.

3. Evolution of risk patterns and pressure for prevention and control: The current downward pressure on the economy is increasing, and corporate debt risks, investment risks, financial business risks (such as financing trade, financial derivatives), overseas asset risks, and compliance risks are becoming increasingly prominent and intertwined. Preventing and resolving major risks is placed in an extremely important position, requiring supervision to go deep into the essence and understand the risk base.

4. Comprehensive improvement of compliance management requirements: The promulgation of a series of regulatory documents such as the "Measures for the Compliance Management of Central Enterprises" marks the transformation of compliance management from "soft requirements" to "hard constraints." Supervision needs to ensure that enterprises are not only compliant in form, but also effectively implement compliance requirements in substantive business activities. This requires the sinking and penetration of regulatory power.

5. Development of regulatory technology: The development of information technologies such as big data, artificial intelligence, cloud computing, and blockchain has made it possible to collect, process, and analyze massive, underlying, and real-time data, providing technical support for "penetrating supervision."

6. Clarification of policy orientation: In recent years, the State-owned Assets Supervision and Administration Commission has emphasized in many meetings and documents the need to strengthen risk prevention and control, especially debt risk, financial risk, and overseas risk management and control, and has clearly proposed to improve the accuracy and effectiveness of supervision and explore the application of penetrating supervision and other means. For example, the meeting of heads of state-owned enterprises at the end of 2024 and the State-owned Assets Supervision and Administration Commission's article in "Qiushi" magazine in early 2025 both clearly regarded "penetrating supervision" as an important starting point for improving the supervision system, and proposed the construction of a digital and intelligent supervision system. Local state-owned assets supervision and administration commissions have also responded and included penetrating supervision as a focus of their work.

(2) The core connotation and characteristics of “penetrating supervision”

1. Core essence: Following the principle of "substance over form", it is not limited to the legal form or hierarchical structure of the enterprise, but strives to "see through" the actual control relationship, capital flow, business substance, risk distribution and ultimate beneficiaries behind it. The purpose is to break down information barriers, eliminate regulatory blind spots, and identify and control real risks hidden under complex structures.

2. Extension and hierarchical differentiation of supervisory objects: not only focus on first-level subsidiaries, but also extend to second-level, third-level and even deeper-level subsidiaries, especially those units that have a significant impact on the overall risk of the group. However, in practice, penetrating supervision needs to be implemented in layers, each with its own focus. As the investor’s representative agency, the State-owned Assets Supervision and Administration Commission’s supervision focuses on first-level enterprises and “two types of companies”. In principle, it does not penetrate directly to its subordinate subsidiaries; while “two types of companies” are given more important responsibilities and need to In accordance with the Company Law and the company's articles of association, through a complete corporate governance structure and internal control system, effective capital penetration management and risk monitoring are implemented for subordinate subsidiaries at all levels within the scope of authorization to avoid cross-level intervention by the State-owned Assets Supervision and Administration Commission and ensure equal rights and responsibilities.

3. Deepening of supervision content: not only focus on result information such as financial statements, but also process and substantive information such as major decision-making processes, key business processes, execution of important contracts, actual use of funds, substance of related transactions, implementation of compliance management, etc.

4. Innovation in regulatory methods: more reliance on data-driven and technological empowerment. Use information platforms to integrate data at all levels to conduct big data analysis, risk modeling, and real-time warnings. Combine on-site inspection and off-site monitoring to achieve dynamic and precise supervision.

5. Main features ("four-dimensional penetration"):

(1) Equity/control penetration: identify the actual controller and clarify the true equity relationship and control chain between subsidiaries at all levels.

(2) Fund/Business Penetration: Track the flow of large amounts of funds and verify the true background, counterparties and potential risks of major investments, mergers and acquisitions, financing, guarantees and other businesses. Pay special attention to the underlying assets and risk exposures of high-risk businesses (such as financial derivatives, financing trade, and PPP projects).

(3) Risk/Compliance Penetration: Identify credit risks, market risks, operational risks, liquidity risks, legal compliance risks, etc. hidden in complex transaction structures or off-balance sheet businesses, and evaluate the actual operating effects of the compliance management system at all levels.

(4) Responsibility penetration: clarify the responsibilities of entities at all levels in the generation and management of risks, prevent responsibilities from hanging around or passing the buck, and ensure that accountability can be implemented to specific units and individuals.

Table 2: Core comparison between “mainly managing capital” and “penetrating supervision”

(3) Practical exploration and mechanism construction

1. Top-level design and policy guidance: State-owned assets supervision agencies will incorporate penetrating supervision into the supervision system construction plan and clarify its positioning, goals and key areas.

2. Construction of digital and intelligent supervision platform: This is the basis for achieving penetrating supervision. Promote the construction of an online supervision system for state-owned assets and state-owned enterprises to achieve real-time, dynamic, and full-coverage monitoring of key information such as corporate finance, property rights, investment, operations, risks, and compliance. Unify data standards and open up information islands.

3. Focus on key areas and key links: Penetrating supervision should first be applied to areas with high risks, such as corporate debt risks (especially hidden debts and high-interest liabilities), divestiture of "two nons" (non-core businesses, non-competitive businesses), liquidation of "two capitals" (inefficient, ineffective assets), financial sector businesses (including quasi-financial businesses), overseas investment and asset management, state-owned assets security in mixed ownership reform, major project investment decisions and post-evaluations, and the implementation process of "three majors and one major" decisions, etc.

4. Strengthen off-site supervision and risk early warning: Use big data analysis technology to establish a risk monitoring model to automatically identify and provide early warning for abnormal indicators and violations, and improve the ability of early detection, early reporting, and early handling of risks.

5. Improve the on-site inspection mechanism: When doubtful points or high-risk signals are found in off-site monitoring, conduct precise and penetrating on-site inspections to verify the situation and identify the problem.

6. Promote internal penetration management of enterprises: urge state-owned enterprise groups to strengthen the management of their subsidiaries at all levels, establish and improve internal control and risk management systems, achieve layer-by-layer penetration of internal management within the group, and consolidate the main responsibilities of the enterprise. In particular, it strengthens the group headquarters’ ability to control major matters of its subsidiaries.

7. Integrate with classified supervision and classified assessment: Based on the problems and risk conditions discovered through penetrating supervision, conduct more accurate classified evaluation and assessment of enterprises, and link the supervision results with the appointment and dismissal of enterprise leaders, remuneration, incentives and constraints, etc., to form an effective closed loop.

8. Active practices of local State-owned Assets Supervision and Administration Commission: State-owned Assets Supervision and Administration Commission of Shanghai, Guangdong, Guizhou, Liaoning, Henan, Anhui, Yunnan and other places have clearly proposed to implement or deepen penetrating supervision, and have explored aspects such as building an online supervision platform, covering all levels of secondary subsidiaries, and focusing on key risk areas. For example, Shanghai has built a "four categories and one layer" classified supervision system, Guizhou emphasizes the coordination of penetrating supervision and classified comprehensive evaluation, Guangdong requires real-time dynamic supervision to cover all state-owned wholly-owned, holding and actually controlled enterprises, Liaoning promotes the construction of smart state-owned assets system to achieve penetrating supervision, and Yunnan uses penetrating supervision to revitalize assets and prevent risks.

Table 3: Key points of practical exploration of “penetrating supervision”

3. Dialectical unity of “mainly managing capital” and “penetrating supervision”

"Capital management as the main focus" and "penetrating supervision" are not mutually exclusive or substitutes, but are two aspects that complement each other and are dialectically unified in the process of deepening the reform of state-owned assets supervision in the new era.

1. Consistency of goals: The ultimate goals of both are to better adhere to and improve the basic economic system, manage and utilize state-owned assets well, prevent the loss of state-owned assets, promote the preservation and appreciation of state-owned capital, promote state-owned enterprises to become stronger, better and bigger, and enhance core competitiveness and the ability to serve national strategies.

2. Logical progression: “Managing capital first” is a directional and principled reform and a fundamental change in the supervision functions of state-owned assets. The focus is on “liberalizing”, clarifying the boundaries of powers and responsibilities, and stimulating corporate vitality. "Penetrating supervision" is a deeper and more substantive supervision method proposed under the framework of "capital management" to address the regulatory vacuum and risk accumulation problems that may arise after authorization and delegation of powers, focusing on "good management" to ensure the safety of state-owned assets. It can be said that "penetrating supervision" is the necessary guarantee for the effective implementation of "capital management first".

3. Functional complementarity: "Manage capital first" focuses on optimizing capital layout at the macro level, standardizing capital operations, improving capital efficiency and playing a role through corporate governance. “Penetrating supervision” focuses on micro-level risk identification, substantive review, process monitoring and compliance assurance. The former builds the framework and the latter fills in the details; the former points out the direction and the latter provides the tools.

4. Practical synergy: In practice, the two need to be closely integrated. The State-owned Assets Supervision and Administration Commission should scientifically define the scope, depth and method of penetrating supervision on the premise of adhering to "mainly managing capital" to prevent "penetrating through to the end" from becoming a new administrative intervention or excessive intervention. It is necessary to rely on the authorized operation system and corporate governance structure formed by "capital management" to feed back the problems discovered by penetrating supervision to the corporate board of directors and supervisory board, and urge enterprises to self-restrain and self-regulate. The information and evaluation results obtained through penetrating supervision should also serve the decision-making of "capital management", such as optimizing capital layout, adjusting the scope of authorization, improving assessment and evaluation, etc.

4. Response strategies and transformation directions of state-owned enterprises

Faced with the new situation of deepening the reform of "mainly managing capital" and increasingly strengthening "penetrating supervision", state-owned enterprises, as regulated entities, must change their concepts, take proactive actions, and actively adjust their management concepts, governance structures, operating models and technical support in order to achieve high-quality development in the new regulatory environment.

(1) Deeply understand the logic of supervision and change development concepts

1. From "I want to manage" to "I want to manage": Fully realize that "mainly managing capital" gives enterprises greater autonomy, but it also means assuming the main responsibility for capital preservation and appreciation, risk prevention and control, and compliance operations. Enterprises need to internalize regulatory requirements and regard compliance operations and risk management as endogenous needs and core competitiveness.

2. From scale and speed to quality and efficiency: adapt to the requirements of "capital management" for capital return, efficiency and layout, and shift the focus of development from pursuing scale expansion to paying more attention to improving core competitiveness, innovation capabilities, value creation capabilities and sustainable development capabilities.

3. Embrace transparency and openness: Understand the inevitability of "penetrating supervision", establish a more open and transparent business philosophy, and actively accept supervision instead of passively coping or trying to avoid it.

(2) Improve corporate governance and improve governance efficiency

1. Strengthen the functions of the board of directors: further standardize the construction of the board of directors and implement the powers of the board of directors, especially its core role in strategic decision-making, risk management, internal control, and manager selection and assessment. Optimize the structure of the board of directors and give full play to the professional supervisory role of independent directors.

2. Fulfill the responsibilities of managers: Improve the professional manager system and establish a market-oriented selection, assessment, incentive and exit mechanism to ensure that managers can effectively implement the decisions of the board of directors and assume operational management responsibilities.

3. Smooth internal supervision: Strengthen the coordination and linkage of the board of supervisors (or similar supervision agencies), internal audit, disciplinary inspection and supervision, compliance management, risk management and other departments to form a joint force for internal supervision and improve the independence and effectiveness of supervision.

(3) Establish a penetrating internal control, risk and compliance management system

1. The internal control system is “through to the end”: establish an internal control system that covers the group headquarters to subsidiaries at all levels and runs through the entire process of decision-making, execution, and supervision. Ensure that internal control measures for key business processes and major risk points can be effectively implemented down to the lowest level.

2. "Comprehensive and dynamic" risk management: implement comprehensive risk management, not only focusing on financial risks, but also paying attention to strategic risks, market risks, operational risks, legal compliance risks, integrity risks, etc. Establish dynamic risk identification, assessment, early warning and response mechanisms, especially to strengthen risk management and control of high-risk businesses, new businesses, and overseas businesses. Strengthen risk consolidation and stress testing capabilities at the group level.

3. "Integrate compliance management into business": embed compliance requirements into business processes to achieve deep integration of compliance management and business development. Establish and improve a compliance management system covering all levels and business areas, strengthen compliance training and cultural construction, seriously investigate and deal with violations, and ensure that "compliance creates value."

4. Construction of "intelligent penetrating management and control" within the enterprise: To deeply understand and proactively adapt to the requirements of external penetrating supervision, enterprises should use the construction of internal control systems as the starting point to build an "intelligent penetrating management and control" system. This means not only establishing a system, but also relying on a unified and integrated group information system to achieve full-level and full-chain real-time tracking and dynamic monitoring of key business processes, major capital flows, core risk indicators, related transactions and other information. Through automatic data collection, model intelligent early warning, etc., we can transform external regulatory pressure into motivation for internal management improvement, proactively identify, prevent and resolve risks, and respond to regulatory requirements efficiently.

(4) Improve capital operation capabilities and optimize capital allocation

1. Focus on the main business: In accordance with the guidance of state-owned assets supervision agencies and its own strategic positioning, optimize capital investment, resolutely withdraw from non-main businesses and non-advantageous businesses that have no competitive advantages ("two nons"), and revitalize inefficient and ineffective assets ("two capitals").

2. Improve capital operation efficiency: Actively use market-oriented means such as mergers and acquisitions, listing financing, property rights transfer, and fund investment to optimize the capital structure, improve the level of capital securitization, and promote the reasonable flow, preservation and appreciation of state-owned capital.

3. Strengthen investment management: Establish scientific investment decision-making, assessment and post-evaluation mechanisms to strictly control investment risks, especially to prevent irrational investment and blind expansion.

(5) Accelerate digital transformation and consolidate information foundation

1. Build an integrated information platform: Vigorously promote the integration and upgrade of the group's internal information systems, break down data barriers, establish unified data standards and data governance systems, and achieve real-time collection, sharing and analysis of key information such as finance, business, risk, and compliance.

2. Improve data analysis capabilities: Use big data, artificial intelligence and other technologies to strengthen in-depth mining and analysis of operating data to provide intelligent support for management decision-making, risk warning, and compliance monitoring.

3. Meet regulatory data needs: Ensure that all types of information required for penetrating supervision can be submitted in a timely, accurate and complete manner in accordance with regulatory requirements, and improve the ability to connect data with regulatory agencies.

(6) Consolidate the responsibilities of entities at all levels and cultivate a compliance culture

1. Strengthen responsibility: clarify the specific responsibilities of the group headquarters, subsidiaries at all levels, their leaders, and key personnel in operation management, risk prevention and control, and compliance operations, and establish and improve the accountability mechanism.

2. Cultivate a compliance culture: Through continuous publicity, training, assessment and other methods, the concept of "compliance is the bottom line and lifeline" is rooted in the hearts of every employee, and a corporate culture atmosphere of "everyone respects compliance and abides by laws and disciplines in everything" is created.

In short, facing the new pattern of state-owned assets supervision, state-owned enterprises must carry out a profound self-revolution, shift from passive adaptation to active leadership, and transform external regulatory pressure into internal governance motivation by strengthening corporate governance, improving internal control systems, improving management capabilities, and accelerating digital transformation, so as to win the development initiative in an increasingly standardized and transparent market environment.

5. Challenges and Prospects: Build a new regulatory system that “unifies loosening up and managing well”

Promoting the reform of "mainly managing capital" and deepening the practice of "penetrating supervision" still face many challenges and require continuous exploration and improvement.

(1) Challenges faced

1. Authenticity and integrity of information acquisition: How to ensure that timely, authentic, comprehensive, and standardized underlying data is obtained from complex enterprise systems is a huge technical and management challenge. There may be resistance or technical barriers within the business.

2. Matching of supervisory capabilities and resources: Penetrating supervision places extremely high demands on the professional qualities of supervisors (requiring knowledge of finance, law, information technology, and specific industry knowledge), data analysis capabilities, and risk analysis and judgment capabilities. Capacity building and resource investment in existing supervisory teams may be insufficient.

3. Supervision costs and corporate burdens: Establishing and maintaining a powerful online supervision system, conducting in-depth data analysis and on-site verification all require huge cost investments. At the same time, in order to meet the penetrating regulatory requirements, companies also need to increase compliance costs and management burdens. Local practices (such as Henan and other places that emphasize "the unification of liberalization and control") have shown that by building a unified and efficient online supervision platform for state-owned assets and state-owned enterprises (such as the experience of Shanxi Province's "penetrating" development zone supervision model), promoting the unification of data standards and information sharing, and realizing data entry once and multi-party application, it will help to ensure the effectiveness of supervision while reducing the burden of repeated submissions by enterprises and reducing overall compliance costs.

4. Definition and grasp of regulatory boundaries: How to achieve penetration without overstepping, supervision without intervention? The boundaries of penetrating supervision must be clearly defined. Although the implementation of penetrating supervision is based on the supervisory responsibilities assigned to investor representatives by the "Enterprise State-owned Assets Law", at the specific operational level, especially in terms of information acquisition, the definition and restrictions of shareholder rights (such as the right to know, the right to make suggestions, the right to inspect under certain circumstances, etc.) in the Company Law should be strictly followed. Regulatory agencies should clarify the scope, procedures and authority of information acquisition mainly through the provisions of the company's articles of association and improving the corporate governance structure, so as to avoid exceeding the scope of shareholders' "right to know" and directly interfering with the operational autonomy enjoyed by enterprises according to law. Prevent it from becoming an excessive infringement of the enterprise's autonomy in business operations, and avoid dampening the enthusiasm and innovation vitality of the enterprise.

5. Technical standards and system integration: The internal information systems of state-owned enterprises are diverse and have different standards, making it difficult to achieve cross-level and cross-enterprise data interconnection and effective integration. However, the application of regulatory technology is providing solutions for this. For example, some leading state-owned assets supervision or enterprise management platforms have been able to achieve real-time collection and penetration analysis of key data such as corporate finance, property rights, investment, and risks across levels and business sectors by building a unified data middle platform and standardized interfaces, providing dynamic risk warning and decision-making support for regulatory agencies and enterprise groups.

6. Legal and regulatory support: The implementation of penetrating supervision requires corresponding legal and regulatory authorization and specification, clarifying the authority of regulatory agencies, the cooperation obligations of enterprises, and information security protection.

7. Changes in culture and philosophy: Both regulatory agencies and enterprises need to be promoted to establish the concept of adapting to the new regulatory model, and understand the necessity and purpose of penetrating supervision to jointly prevent risks, rather than simply "looking for trouble."

(2) Future prospects

1. Uphold and strengthen the Party’s leadership: Uphold the Party’s leadership throughout the entire process of the reform and practice of the state-owned assets supervision system, ensure that the reform always moves in the right direction, and ensure that state-owned assets are firmly in the hands of the Party and the people.

2. Deep integration and synergy between “capital management” and “penetration”: The future state-owned assets supervision system will be an organic whole guided by the principle of “capital management first”, based on market-oriented and legal methods, and using digital and intelligent penetrating supervision as powerful means.

3. Regulatory requirements continue to deepen: policy guidance becomes increasingly clear. Entering 2025, when deploying the construction of the internal control system of central enterprises, the State-owned Assets Supervision and Administration Commission of the State Council clearly proposed that penetrating supervision should be the main line, requiring downward full-level, full-chain, and all-factor penetration in terms of risk management and compliance management, showing the determination of the regulatory authorities to use penetrating means to strengthen substantive risk management and control.

4. Comprehensive empowerment of regulatory technology: Big data analysis and artificial intelligence will play a core role in risk identification and early warning, compliance review, related party transaction monitoring, performance evaluation, etc., promote the transformation of supervision from "human sea tactics" to "technology-driven", and realize the normalization and intelligence of off-site supervision.

5. Deepening of differentiated and precise supervision: For enterprises with different functional positioning, different industry characteristics, different risk levels, and different governance levels, implement differentiated penetration intensity, frequency and focus to achieve precise supervision of "one enterprise, one policy".

6. Build a large pattern of coordinated supervision: Strengthen the linkage between state-owned assets supervision agencies and investment enterprises (especially the headquarters of "two types of companies"), as well as horizontal coordination with discipline inspection and supervision, auditing, industry supervision departments, etc., to form a regulatory synergy.

7. Continuously optimize the balance between authorization and effective supervision: dynamically evaluate authorization effects and risk status in practice, adjust the scope of authorization and supervision strategies in a timely manner, and strive to find the best combination of "flexible decentralization, manageable management, and good services".

8. Improvement in the level of legalization: Further improve the legal and regulatory system related to state-owned assets supervision to provide a solid legal guarantee for "capital management first" and "penetrating supervision".

6. Conclusion

From the establishment of the strategy of "mainly managing capital" to the exploration and deepening of "penetrating supervision", it reflects the continuous evolution of my country's state-owned assets supervision system as it adapts to the development of the times, responds to risk challenges, and improves governance efficiency. This is not only a change in regulatory concepts, but also a systematic upgrade of regulatory methods, tools and capabilities. "Penetrating supervision" is an important support and implementation path under the "capital management first" framework. Its effective implementation will greatly enhance the pertinence, timeliness and effectiveness of state-owned assets supervision, and build a solid line of defense to prevent and resolve major risks and ensure the safety of state-owned assets. At the same time, this also puts forward higher requirements for the governance capabilities, management level and transformation willingness of state-owned enterprises themselves. Looking to the future, we must build a new state-owned assets supervision system that is more mature, more established, more intelligent, and more legalized, to achieve a dynamic balance and positive interaction between the release of the vitality of authorized operations and the rigid constraints of effective supervision, and through the coordinated efforts of "capital management" and "penetrating supervision" to promote The supervision of state-owned assets has been upgraded from the traditional bottom-line thinking of "preventing loss" to the more active goal of "promoting value creation". The ultimate goal is to support state-owned capital to better serve the country's strategic needs, enhance the core competitiveness and core functions of state-owned enterprises, and provide a stronger material foundation and strategic support for Chinese-style modernization.