Corporate Financial Objects Of SOEs In China

The financial object is the result of the financial activities which enterprise hopes to realize, and is the primary standard that appraises whether the financial activities are reasonable. Because the financial object directly reflects the changes of management, and makes the appropriate readjustment accordingly, it is the essential factor and guidance of the financial management, and is the starting point and the finishing point in the financial decision-making. The financial object restricts the basic characteristic and the direction of the financial development and is the driving force of financial management. The different objects have different movement mechanism, so the scientifical establishment of the financial goal has the vital significance to optimize the behavior of the financial management and to realize the positive cycle of financial management.Since Chinese economic reform from 1978, corporate financial objects of state-owned enterprises (SOEs) in China have evolved for several distinct stages. In the 1980s, the government introduces the responsibility system to induce SOEs maximizing the total output. With the cultivation of the market system, the government changes the responsibility system to the contract system to induce SOEs maximizing the total profit. In the 1990s, through listing SOEs in the stock market, the government has the second channel to monitoring SOEs through the stockholders. Consequently, the stockholders' benefit becomes the main object of the listed SOEs. In the 2000s, with the drainage of state assets, deterioration of the natural environment, and exaggeration of the income disparity, the government orders SOEs to put the total social value as their ultimate object.The current literature focuses on discussing the advantages and disadvantages of these different objects. This paper argues that they might ignore the change of the social environments constraints to the government since Chinese economic reform from 1978. By analyzing the evidence of Chinese economic reform and China Petroleum & Chemical Corporation (SINOPEC), this paper shows that at each stage the corporate financial object of SOEs is always the optimal choice of the government given the economic and political environments at that time. It supports the famous saying of Deng Xiaoping that the guiding principle of the reform is "wading across the river by feeling stones along the way".