Singapore’s Temasek Model and State Asset Management in China: Influence and Limits Open Access

Singapore emerged as an important policy reference for China at the start of the reform and opening era. High-level exchanges catalyzed closer bilateral ties: after Deng Xiaoping visited Singapore in 1978, prime minister Lee Kuan Yew traveled to China numerous times to meet with top leaders. In 1985, Singaporean economic architect Goh Keng Swee accepted a formal role as an economic advisor to China’s State Council, interacting directly with premier Zhao Ziyang and vice-premier Gu Mu (Zhao 2016). Deng further elevated Singapore as a policy reference by stating during his Southern Tour in 1992 that China “should learn from their experience” (Liu and Wang 2018, 989). Later that year, vice-minister Xu Weicheng led a delegation from China to compile a comprehensive report on Singapore’s social and economic policies (Leng 1992).

These high-level exchanges between Singapore and China gave way to broad, routine, and increasingly institutionalized engagement by the 1990s. John Wong (1998, 51) observes that “hundreds of China’s government departments and public organizations from the central to local levels sent delegations and observer groups to Singapore over the period from 1992 to 1994.” Bilateral engagement addressed diverse topics, including governance, state asset management and SOEs, public housing, pensions, legal systems, and anti-corruption measures. Liang Fook Lye (2010, 173) explains that since the 1970s “the relationship between the two countries has progressed from being personality-driven to encompass a more institutionalized approach.”

China–Singapore engagement is part of a larger phenomenon of Chinese policymakers engaging international actors and ideas during domestic policymaking. As Chinese officials and economists began to reform the state sector and enterprises in the late 1970s, they interacted frequently with the World Bank, Japan, and others for advice, examples, and material assistance. In the 1990s, as China negotiated to join the World Trade Organization, Chinese leaders’ concerns about intensified competition with foreign firms motivated renewed efforts to build internationally competitive “national champions”—large, central-government-owned enterprises in strategic sectors (Eaton 2015). In the late 1990s and into the 2000s, American and international legal and financial actors helped repackage large industrial Chinese SOEs for public listing in Hong Kong and overseas, facilitating their transformation into today’s partially privatized, globally competitive multinational corporations (Walter and Howie 2012). China’s engagement with Singapore is thus only one instance of actors and ideas from abroad becoming inputs into the domestic transformation of state asset management and SOEs.

In a process I term “policy collage,” Chinese policymakers routinely seek inputs from multiple international sources in a specific policy area and then selectively and creatively tailor them to China’s particular conditions. This metaphor refers to collage as a form of art creation in which the cumulative assemblage of different forms, which may be adapted, partial, or overlapping in nature, creates a new whole. In this process, policy inputs from different international sources are combined with each other as well as with existing domestic policy ideas and practices. As John Wong (1998, 61) observes: “China could emulate Singapore, or any other country, only eclectically.” Unlike bricolage, which entails the inward-looking amalgamation of extant ideas and practices, policy collage entails external searching for alternative ones to integrate. In other words, whereas bricolage stresses making do with the tools at hand, policy collage emphasizes adding new items to the toolkit (Leutert 2022).

This study contributes to scholarship on policy learning and diffusion in several ways. First, much scholarly attention has centered on international organizations and transnational advocacy networks as sites in which states like China may be socialized to alter their policies (Johnston 2008; Keck and Sikkink 1999). Yet much international engagement occurs outside such venues, through exchanges, advisors, and the study of other countries’ experiences. China’s interaction with Singapore and other countries further demonstrates that modification of domestic preferences via socialization is not a prerequisite for policy change. In practice, much engagement involved highly purposive and pragmatic efforts to solve particular policy problems. The concept of policy collage also highlights composite policy outcomes: “collages” of ideas and practices from various international sources and the domestic realm. This challenges scholars to rethink the limited and linear way in which outcomes of policy diffusion are often conceptualized. Specifically, it suggests that measuring the effects of policy diffusion merely as the degree to which policy elements in a single country are unidirectionally “transplanted” to another fails to capture a more complex policy reality (Goldbach 2019).

This study uses qualitative and quantitative data from three kinds of sources: interviews conducted in Singapore and China with key stakeholders; a large body of primarily Chinese-language written sources spanning more than four decades; and descriptive statistics about Temasek and SASAC collected from their official websites, annual reports, and media sources. I conducted in-person, semi-structured elite interviews in Singapore between January and April 2023 and in China between February and June 2016.² Interviewees included key stakeholders with firsthand experience and knowledge of state-asset management in Singapore and China as well as bilateral engagement since the late 1970s. I collected the written sources in Singapore, China, and the United States.

I analyzed this body of qualitative and quantitative data using process tracing (Bennett and Checkel 2014). Process tracing is an appropriate method for this study because it enables analysis of (1) the steps through which the development of state-owned asset management systems in China and corporate governance institutions in Chinese SOEs actually occurred; (2) dynamic interactions involving multiple organizational and individual actors in Singapore and China; and (3) changes over time in government and SOE organizational structures and behavior. The triangulation of quantitative and qualitative data spanning several decades enabled the collection of both “measurement evidence” (showing that events in a particular process-tracing chain occurred) and “identifying evidence” (ruling out confounding factors and processes) (Nielsen 2016). This study assesses bilateral engagement as one factor influencing the evolution of China’s central-level state asset management system and SOEs; it does not assert a monocausal explanation.

Singapore established Temasek Holdings (Temasek) as a government holding company in 1974. Temasek assumed ownership and management of state-owned assets from the minister for finance, with the Ministry of Finance remaining its sole owner. Its initial portfolio included 35 state-owned companies (Temasek 2022a). The goal of creating Temasek was to “separate the regulatory and policymaking function of the Government from its role as a shareholder of commercial entities” (Temasek 2023a). The government exercised continued oversight through mechanisms including the Ministry of Finance’s right to appoint, reappoint, or remove Temasek board members, subject to the president’s approval. Board members’ appointment or removal of the CEO was also subject to presidential review and approval (Kirkpatrick 2014, 10). Senior civil servants headed Temasek until the appointment of its first non-civil-servant CEO in 2002 (Ng 2010).

In the 1980s, the Singapore government embraced the creation of what it called government-linked companies (GLCs). This term describes instances of mixed ownership in which a varying portion of a state enterprise’s shares become privately owned. In 1985, Singapore launched an official privatization strategy to recalibrate the government’s role in the economy. In 1987, it established a Public Sector Divestment Committee to formally consider privatization procedures. The committee’s report, issued later that year, identified initial targets for privatization in Temasek’s portfolio and beyond. Out of 91 first-tier GLCs owned by the government, of which 44 belonged to Temasek, the report recommended publicly listing 15, further privatizing 9, completely privatizing 17, and “winding up” 9, with the others to maintain their status quo or be subject to further study (PSDC 1987, 4). It also identified privatization’s goals as broadening and deepening the domestic stock market via listing of well-performing GLCs, state withdrawal from commercial activities that could be undertaken by the private sector, and reducing state competition with the private sector (12). Several methods of privatization subsequently undertaken, however, diminished neither state ownership nor state control. For example, the government retained control over publicly listed GLCs in which it kept a majority share. It also kept ownership and control when it leased or contracted public services to the private sector. And retired civil servants or former politicians continued to head some privatized GLCs (Lee and Haque 2006).

In the 2000s, Temasek shifted its mode of global expansion from internationalizing its own GLCs’ business to making major new equity investments overseas, especially in emerging markets (Ng 2010). In 2005 it boosted investments in China by acquiring shares in the Bank of China and the China Construction Bank, and then made a series of investments in Chinese financial institutions and firms. Investments in China account for 22% of Temasek’s net portfolio value as of 2023, down from a peak of 29% in 2020 (Finews 2022; Temasek 2023b). This includes stakes in the Bank of China, the China Construction Bank, Pingan Insurance, Alibaba, Didi, JD.com, and other entities. However, Temasek’s China assets are larger than these direct holdings, because they also include investments in China by its Singaporean portfolio companies. For example, Temasek owns a 40% share in Singaporean real estate developer CapitaLand, which is active in Chinese real estate markets and invested S$4.9 billion (USD 3.7 billion) to build a large commercial development in Chongqing (Nakano 2018). Today, Temasek manages a portfolio of primarily equity investments centered in Asia and currently valued at S$403 billion (USD 300 billion). Its scope spans sectors including financial services, transportation, telecommunications and technology, life sciences, consumer goods, and real estate assets.

Temasek delegates decision-making authority to firm management while remaining an “owner investor” and “active investor” (Temasek 2023c). Formally, it observes the principles of “non-intervention” and “non-preference” (Ng 2018). It appoints the boards of its portfolio companies and maintains close communication with and oversight of them, but it does not intervene in daily corporate decision-making. Temasek also permits the boards of portfolio companies to determine their own governance practices within the context of broad policies it sets (Teen n.d.). However, Temasek is also a hands-on investor. For example, it may act to create new companies to foster complementary capacities or to exploit what it identifies as new market opportunities. One recent example is Temasek’s 2022 creation of GenZero, an investment platform company focused on decarbonization (Temasek 2022b).

Improving state sector governance and performance has been a top goal for China’s leaders from Deng Xiaoping to Xi Jinping. In 1988, Chinese leaders established the State Assets Administration Bureau (SAAB) as a vice-ministerial-ranked unit of the Ministry of Finance to manage the productive assets owned by industrial ministries in coordination with the State Council. Agencies similar to SAAB had been set up earlier at provincial and municipal levels to manage and monitor state-owned assets subnationally; they were to receive “guidance” from SAAB at the national level but were not formally under its direct control (World Bank 1997, 53). Chinese leaders tasked SAAB with an ambitious and expansive mandate: drafting regulations, compiling statistics, evaluating assets, making decisions about public listing and downsizing of state-owned assets, and even dispute resolution. In practice, however, SAAB’s limited administrative capacity and lack of personnel appointment authority rendered it little more than a “state-owned asset registry” (guoyou zichan de dengji guanli jigou, 国有资产的登记管理机构) unable to overcome entrenched resistance to reform (Shao 2014, 397).

Chinese SOE performance deteriorated in the 1990s, spurring calls for a fresh approach to state asset management. In 1995, 44% of China’s SOEs incurred losses, equivalent to approximately 1% of GDP (World Bank 1996, v). As Zhang Chunlin (2019, 4) recounts, “The challenge was how to establish agencies that will represent the owner of state-owned assets in SOEs, and how to find an efficient way for the ownership rights of the state to be realized.” After a major restructuring of the State Council in 1998 abolished SAAB, the problem of the lack of an entity to represent the state’s ownership interests grew worse.

SAAB’s elimination fragmented administrative authority for state-owned asset management across the Chinese bureaucracy. Some contemporary observers used the expression “nine dragons ruling the waters” (jiu long zhi shui, 九龙治水) to describe the plural and competitive state of state sector governance in this period (Shao 2014, 403). Myriad government and Chinese Communist Party (CCP) actors undertook various aspects of state asset and SOE management.³ Since each had only partial authority, the unified exercise of trusteeship rights and the clear assignment of fiduciary responsibility were impossible. Ministries and local governments alike fought to control state-owned assets, while trying to pass on responsibility for debts to others.

Chinese officials and economists debated competing models for a new central-level state asset management system. Some advocated for a commission or chamber-type organization to be part of the State Council. Others argued it should be a commission under the authority of the Standing Committee of the National People’s Congress, with several holding companies below it administering portfolios of SOEs. One proposal even suggested a hybrid approach: combining a commission to manage state-owned assets under the State Council with a commission to manage SOEs under the National People’s Congress in order to achieve “checks and balances of interests” (liyi zhiheng, 利益制衡).⁴ Others endorsed SAAB 2.0: setting up a new state-owned asset management bureau under the Ministry of Finance (Zhang et al. 1994). Still others felt that such an entity should be entirely nongovernmental in nature (Zhang 1997).

Chinese policymakers also differed on how a central-level state asset management system should be organized. Some proposed a two-tiered structure. In this design, a first-tier government entity—either a body with dedicated personnel or a commission with members drawn from across relevant bureaucratic units—would manage state-owned assets. The second tier would be corporatized SOEs. In theory, a two-level structure would incur fewer agency costs, minimize bureaucratic complexity and confusion, and reduce the need for principals to manage and monitor agents at multiple levels. However, a two-tiered entity would remain primarily administrative rather than market-oriented in nature. The first tier would still be staffed by civil servants: officials either employed full-time or with concurrent appointments in other government or Party units.

Others proposed a three-tiered structure. The first tier would be a government entity run by civil servants with exclusive authority to act as the owner of state-owned assets; a second tier of commercial entities, like state-owned holding companies or state-owned asset management companies, would conduct day-to-day management; and a third tier of SOEs would operate under their authority. The first state tier would wholly own the second-tier commercial entities, which in turn would control the third-tier SOEs through representation on their boards. In theory, a three-tiered structure could achieve “two separations”: separation of the state’s ownership function from its other functions, and separation of the state’s ownership function from the day-to-day operation of state assets (Mako and Zhang 2002, 4).

In the 1990s, the “Shanghai model” was the most prominent subnational example of a three-tiered approach to state asset management (Shao 2014, 394–95; World Bank 1997, 35–37). In Shanghai, the first tier was a State Asset Committee (SAC) consisting of the mayor and more than 30 heads of municipal agencies. SAC delegated its daily work to an executive body, the State Asset Management Office, which included SAC’s general secretary and about 50 staff. The second tier was state asset operating companies (holding companies), state asset group companies, and industry “trade associations” derived from former line bureaus in sectors like machinery and electronics, chemicals, and light industry and textiles (Dong 1996, 207). SAC directly supervised and appointed executives of the state asset operating companies and the state asset group companies in the second tier, totaling 39 companies by the end of 1997 (Zhang and Pan 2001, 17). The third tier was a large array of “operating entities”—over 15,000 of them in 1997 (World Bank 1997, 37). The state asset operating companies and state asset group companies represented the state’s interests in these entities by supervising their operations and via representation on their management teams. A 1996 World Bank report endorsed Shanghai’s state asset management approach as the most commercially successful in China: “In Shanghai the share of losses of local state-owned enterprises amounts to just 2 percent of local state-owned enterprises industrial value added. These losses represent just one-third of total industrial losses” (12).

Chinese policymakers were interested in Temasek as an example of a three-tiered state asset management system (SASAC 2006). As discussed previously, the national government in Singapore supervised a state-owned holding company, Temasek, which in turn held equity stakes of varying percentages in a portfolio of state enterprises and investments. Chinese policymakers noted that the Singapore government retained oversight and key personnel powers while delegating to Temasek the authority to manage its portfolio to maximize investment returns (SASAC 2020a). They felt that Temasek’s three-tiered organizational structure embodied China’s reform principle of “separation of government and enterprise” (zheng qi fenkai, 政企分开) by formally detaching ownership from control rights, and they expected that emulating Singapore’s three-tier system would enable enterprises to “operate in accordance with market economy laws” (Liu and Chen 1996, 18).

Top Chinese officials were personally familiar with Temasek’s organizational structure and operations. Premier Zhu Rongji visited Singapore in November 1999, accompanied by the vice-minister of the State Economic and Trade Commission, Li Rongrong, who would later be the founding director of SASAC. Li reportedly recalled that the Chinese delegation was “very stimulated” (ciji hen da, 刺激很大) by the report received during their visit to Temasek’s headquarters, and that he “believed it was also very stimulating to Premier Zhu Rongji” (Yang 2017, 20). Temasek representatives told Zhu’s delegation that none of their portfolio companies, including subsidiaries, were operating at a loss. This contrasted starkly with China, where two-thirds of its 240,000 SOEs lost money in the same year (20).

Despite the appeal of Temasek’s commercial success, however, domestic factors ultimately prompted Chinese policymakers to reject the three-tier approach. Problems emerged with the Shanghai model, which Chinese analysts had compared explicitly to Temasek (Zhang and Pan 2001). Shanghai’s first-tier SAC became increasingly ceremonial, because its members were all concurrently appointed bureaucrats. SAC’s authority to approve major investment decisions also meant the government’s myriad welfare and employment goals remained top priorities (18). Second-tier actors were ostensibly commercial in nature but in practice remained “quasi-governmental,” with many intervening extensively in third-tier-entity operations and the same old-guard bureaucrats still in charge (Mako and Zhang 2002, 5). Some blamed the state’s hurried creation of second-tier entities, describing the process as “non-market” and “done backwards” compared to Temasek (Zhang and Pan 2001, 17). Unlike Temasek, Shanghai started with third-tier operating entities and then created second-tier state asset operating companies (holding companies) and state asset group companies or industry trade associations (converted from former line bureaus) to manage them. By the late 1990s, Shanghai’s government was effectively bypassing the second tier by implementing “authorized operations” (shouquan jingying, 授权经营) and signing performance contracts directly with better-performing large SOEs in the third tier (Mako and Zhang 2002, 5). The theoretical separation of government and enterprise embodied in the three-tier institutional design dissolved.

Surging corruption also weakened support in China for a three-tier approach separating government ownership and control rights. As Hu Jiayong (2002, 38) described this situation: “Since the government is the ownership representative of state-owned assets, it must exercise control over them; otherwise, the phenomenon of loss of control over state-owned assets is inevitable. Once such control is implemented, the separation of government and enterprises becomes difficult.” Graft had long bedeviled the state sector: a “conservative estimate” by SAAB reported more than RMB 500 billion (USD 72 billion) in losses from 1982 to 1992 (Dong 1996, 205). And corruption worsened in the 1990s as SOE insiders stripped state-owned assets, sold them at below-market prices, and even borrowed against state-owned assets to reinvest in them under employee shareholding schemes (Lü 2000). SAAB’s abolishment in 1998 accelerated what the World Bank (1997, 50) termed an “emerging corporate governance vacuum” of “insider control.” Bankruptcies spiked that year, as enterprises used a wide variety of illegally declared bankruptcies to avoid debt repayment (Brahm 2002, 58–59). The central government tried to rein in spiraling corruption by dispatching inspectors to major SOEs nationwide to oversee asset restructuring (State Council 1998a, 1998b).

Debate on the design of a central-level state asset management system culminated in the Hu Jintao administration’s establishment of the State-Owned Assets Supervision Administration and Commission (SASAC) in 2003. SASAC’s mission was twofold: represent the state as shareholder; and formulate and approve an SOE reform program in accordance with State Council policies. SASAC had a portfolio of 189 SOEs and formal authority to manage personnel and matters (guan ren guan shi, 管人管事) in addition to state assets (see Appendix 1 in Shao 2014 for a company list). SASAC was also authorized to assess central SOEs and their leaders annually, and it exercised personnel authority over the executives of central SOEs with department-level administrative rank equivalence (Leutert 2018). SASAC did not directly control enterprise budgets, nor did it receive SOE profits; these powers remained with the Ministry of Finance (Naughton 2008).

The new SASAC era began with a flurry of visits between SASAC and Temasek leaders. Temasek dispatched two delegations to Beijing immediately after SASAC’s establishment in March 2003, expressing its “willingness to strengthen cooperation with SASAC and introduce some of its successful practices, experiences, and lessons to SASAC” (SASAC 2004a, 2004b). SASAC director Li Rongrong returned to Singapore in June 2003 for more on-site meetings and study of Temasek. In 2004, Li led an eight-person delegation on another study tour to Singapore (Li 2007, 7). While visits between SASAC and Temasek were most frequent in SASAC’s early years (in the 2000s), they have occurred regularly since then. Between 2004 and 2023, SASAC’s website reports nearly 20 formal and informal visits by Temasek leaders to SASAC in China.⁵ Executives from Temasek portfolio companies such as Neptune Orient Lines also visited SASAC (SASAC 2004c).

After SASAC’s creation, China’s engagement with Temasek and Singapore shifted to focus on corporate governance in SOEs. The idea was that corporate governance institutions—particularly boards of directors at the group company (jituan, 集团) level—could now achieve the separation of the state’s ownership and control rights at the firm level which SASAC’s two-tier institutional design had earlier eschewed.⁶ SASAC engaged closely with Temasek as it formulated corporate governance reforms, jointly hosting a forum on board of directors development at the Diaoyutai State Guesthouse in Beijing in 2004 (SASAC 2004d). That year, SASAC and the Central Organization Department tapped seven central SOEs to pilot restructuring as wholly state-owned firms and establish boards of directors at the group company level, with a minimum of two external directors (SASAC 2004e). In 2005, SASAC and Temasek further set up a joint “small cooperation group” (hezuo xiaozu, 合作小组) to discuss issues related to boards of directors (SASAC 2010). As of the beginning of 2008, 17 central SOEs had group-level boards with more than 50% external directors. SASAC expanded group company board establishment to 24 central SOEs in 2009. SASAC also issued provisional regulations standardizing board operations in pilot enterprises and enshrining their powers in corporate articles of association (SASAC 2009). The pace of board establishment was steady into the 2010s, and 87 central SOEs had boards of directors at the group company level by the end of 2017 (Bai 2017).

Engagement with Singapore and Temasek shaped SASAC’s development of SOE corporate governance institutions. Director Li Rongrong repeatedly invoked Singapore, stating in 2006, “The experience of Temasek, a state-owned enterprise, is worth learning, and the most important thing is its corporate governance structure” (Li 2007, 8). Li lauded Temasek’s approach of dispatching a state investor representative to boards of directors as one important way to shift from top-down administrative management to more indirect state participation in corporate decision-making (7). Board creation, however, did not mean that Chinese SOEs would enjoy unfettered decision-making autonomy. Li also noted that Temasek maintained close and frequent communication with boards of directors in its portfolio companies, and that this formed the basis for board decision-making (20). However, Temasek’s approach to corporate governance proved difficult to implement in China.

A fundamental discrepancy between form and function has long characterized Chinese SOE corporate governance. The most important reason is that newly created boards of directors in Chinese SOEs have never been given critical powers like executive selection, assessment, compensation, and standard-setting. SASAC has the authority to propose directors and supervisors to any “state invested enterprise,” regardless of the ratio of state ownership (Ozery 2021, 950). Independent directors on SOE boards are few, and they cannot effectively monitor executive decision-making, because the controlling state shareholder nominates and appoints them (Jiang and Kim 2015).⁷ Furthermore, many nominally independent directors have ties with SOE insiders that fall short of formal standards for relationships of interest, or which they fail to capture (Lin 2013). Standard economic incentives to align executive and shareholder interests, such as executive compensation and shareholding, are absent in most Chinese SOEs because of CCP-imposed curbs (Jiang and Kim 2020).

In addition to Chinese SOE boards’ lack of key powers, other factors have contributed to the form–function gap in their corporate governance. The rapid pace of board establishment in central SOEs, for example, made it challenging for companies and their leaders to keep up and alter their operations in a meaningful way. Some SOE leaders also resisted new decision-making mechanisms they viewed as unnecessary or unwanted. Former Baosteel Group chairwoman Xie Qihua, who traveled to Singapore to study Temasek, described the extent of executive effort and buy-in required to transform enterprise governance:

A significant gap persisted between the appeal of the Temasek model and its actual influence in Chinese SOE corporate governance.

Training programs were another way in which Singapore and Temasek affected the evolution of China’s SOEs and state asset management. In May 1992, Nanyang Technological University organized its first executive development program for Chinese officials: a short-term training for 36 senior managers from Changfeng Science and Technology Industry Group, an SOE under China’s Ministry of Aerospace Industry (Nanyang Centre for Public Administration 2022, 56). A former senior Singaporean government official described the motivations for these training programs:

Between 2005 and 2015, 940 board chairmen, directors, general managers, and other senior personnel of Chinese SOEs under SASAC received training in Singapore (Business China N.d.a). State sector officials from central and local levels studied Temasek and its experience in areas including corporate governance, investment strategy, risk management, and human resources (Qingdao SASAC 2010; Shandong SASAC 2010). These training programs provided targeted skills training and knowledge based on Temasek’s experience, although it is difficult to assess their specific impact on subsequent practice in China.

Engagement between Temasek and SASAC continues today but is now more about bilateral cooperation and commercial opportunity than institutional emulation. One example is the SASAC-Temasek Directors Forum, which has occurred twice a year in Singapore since 2005. During these forums, SASAC delegations of Chinese SOE board members and executives conduct meetings and site visits with Temasek and its portfolio companies. As the Singaporean nonprofit organization Business China (2015) describes it: “The exchange platform allows Singapore companies to better understand China and the Chinese SOEs, explore cooperation opportunities and proactively participate in China’s opening up and reforms.” This forum had been held 27 times as of 2020 (SASAC 2020a).

The appeal of the Temasek model has exceeded its actual influence on China’s state asset management and SOEs. Domestic factors, especially the shortcomings of Shanghai’s three-tiered state asset management system and the soaring corruption of the 1990s, deterred Chinese leaders from fundamentally separating state ownership and operational control. They thus used a two-tier design when they established SASAC in 2003. Under Li Rongrong’s leadership, SASAC subsequently pushed to separate state ownership and control at the firm level by setting up and developing boards of directors in SOEs, especially in the 2000s, but these efforts failed to gain lasting traction. China today appears even less likely to emulate the Temasek model. Combining stronger CCP leadership with corporate governance institutions—not separating government from enterprises—is the Xi Jinping administration’s explicit policy goal (Economic Information Daily 2023).

Yet Singapore and the Temasek model remain attractive references for many in China. The enduring appeal is both ideological and practical. Ideologically, the Temasek model affirms Chinese leaders’ long-held aspiration that SOEs can operate successfully as market actors under professional management while maintaining under state ownership and control. Practically, it presents a concrete prescription for commercial success centered on specific technical knowledge about corporate governance and state capital management. Chinese officials’ interest in Singapore’s approach indeed appears to derive substantially from its practical governance lessons and their potential transferability (Liu and Wang 2018).

However, multiple factors limit the replicability and influence of the Temasek model in China today. First, China’s state sector is far larger and more indebted than Singapore’s. China’s SOEs accounted for an estimated 4.5% of global GDP in 2019, while those of Russia, India, Vietnam, and Serbia together added up to less than 1% (Zhang 2023, 13). They also rank among the largest firms by revenue globally, with 97 SOEs from mainland China and Hong Kong on the 2023 Fortune Global 500 (SASAC 2023). As former SASAC director Li Rongrong once observed, “The assets of one of our central SOEs, such as the State Grid Corporation of China, are basically equivalent to all of Temasek’s assets” (Li 2007, 8). SASAC also confronts a much higher debt burden than Temasek. SASAC reported RMB 68.3 trillion (USD 9.7 trillion) in total debt for central SOEs in 2021, whereas Temasek reported S$17.6 billion (USD 13.1 billion) in total debt as of March 2022 (SASAC 2022; Temasek 2022c). This yields a total-debt-to-total-assets ratio of 66.9% for SASAC for 2021, dwarfing Temasek’s 2.7% as of March 2022.⁹

Second, firm performance is a much weaker determinant of asset and capital allocation in China’s state sector. This is evident in the evolution of SASAC’s and Temasek’s original portfolios. SASAC’s 2003 portfolio of 189 firms numbers 97 today; almost all of the “disappeared” firms were merged into other central SOEs (Leutert 2015). Chinese SOE mergers may have market-oriented motivations, like linking strong performers (qiang qiang lianhe, 强强联合) or combining SOEs in surplus-capacity industries to coordinate capacity cuts (Leutert 2016). However, most have involved stronger SASAC firms absorbing poorer performers as a politically and socially acceptable alternative to bankruptcy. In contrast, 25 of Temasek’s original 35 portfolio firms have been divested or liquidated since 1974 (Temasek 2022a). Mergers among GLCs in Temasek’s portfolio are far less frequent and not a functional substitute for bankruptcy. Chinese SOEs also continue to enjoy preferential access to financing despite performing much worse than privately owned firms. Return on assets, a standard measure of how efficiently a company generates profits from its assets, was only 3.0% for SOEs, compared with 6.7% for private firms in China, as of the second quarter of 2020 (Rhodium Group and Asia Society Policy Institute 2021). However, Chinese SOEs enjoy a sustained advantage in access to capital via larger loan facilities, lower interest rates, and more subsidies relative to former SOEs as well as to privately owned companies with no previous state ownership (Harrison et al. 2019).

Third, SOEs directly implement far more social and welfare functions for the state in China than in Singapore. China’s leaders deploy SOEs to manage a variety of economic and social crises, from stock market volatility to popular protests (SASAC 2015; Zhai 2019). They dispatch SOEs to the front lines to respond to natural disasters and public health emergencies, such as the COVID-19 pandemic (SASAC 2020b). They also routinely use state firms to promote social stability through employment, for instance by assigning SOEs hiring quotas for college graduates since the start of the COVID-19 pandemic in 2020 to tackle soaring youth unemployment (State Council 2023). SOEs also serve a subnational redistributive function by channeling most of their investment on infrastructure to poorer interior and western provinces (Batson 2017).

Fourth, China’s government has never been willing to grant firms the autonomy in commercial decision-making that Singapore and Temasek do. For much of China’s reform era, the implicit trend was a division of labor between SOE managers (later boards of directors) assuming primary responsibility for commercial decision-making, while SOE Party committees led personnel, political affairs, and internal supervision and anti-corruption efforts. The Jiang Zemin administration indicated in 1999 that full separation between government and enterprises would not occur, but it still formally endorsed further development of corporate governance institutions—as did the Hu Jintao administration (CCP Central Committee 1999). However, political elites’ support for board of directors establishment and empowerment weakened over the 2000s and 2010s, as did SASAC’s efforts to promote these objectives. Today, the Xi Jinping administration is now formally fusing SOE governance and Party leadership more deeply to promote what it calls “SOE modern corporate governance with Chinese characteristics” (zhongguo tese guoyou qiye xiandai gongsi zhili, 中国特色国有企业现代公司治理) (Economic Information Daily 2023).

A final factor limiting the Temasek model’s influence in China is divergent interpretations of its content and its reference value for China. Singaporean and Chinese officials have not always shared the same understanding of Temasek and its operations. A former senior Singapore government official recounted a conversation with Goh Keng Swee in the 1980s:

In practice, some Chinese policymakers may have “mis-modeled” the Temasek model and thus made divergent inferences about its potential lessons for China (Ortmann and Thompson 2018; Thompson and Ortmann 2018). Perhaps unsurprisingly, individuals’ particular positions and interests also shape how they interpret potential lessons from Temasek. For example, Chinese government and Party officials who are focused on personnel management tend to emphasize the importance of SOE executive qualifications and the state’s personnel authority rather than corporate governance development. SASAC analysts have questioned the suitability of the Temasek model for China, which regardless of its particular form would involve devolving some of SASAC’s authority to more commercially oriented entities.¹¹ Divergent interpretations of, and opinions on, the Temasek model still abound in China.

Decades of China’s engagement with Singapore and its Temasek model highlight the international context and content of evolution in China’s state sector and SOEs. In contrast to domestic-centered narratives of Chinese SOE reform and state asset management, this study provides evidence that Chinese policymakers have also consistently engaged with foreign actors and ideas—even if domestic factors were sometimes still decisive. Changes in China’s SOEs and state asset management, like Chinese economic reform more broadly, have occurred in a global context with input from abroad (Eaton 2015; Gewirtz 2017; Heilmann and Shih 2013; Weber 2021).

Engagement with Singapore and the Temasek model also helps explain why China’s convergence with advanced capitalist economies remains unlikely. Chinese policymakers’ incorporation of ideas and practices from international sources, such as corporate governance institutions, can yield points of formal congruence without fundamental convergence. That is, boards of directors in Chinese SOEs may resemble those in other country and corporate contexts, but this does not mean they operate in the same way. The “Temasekization of SASAC” (Lin and Milhaupt 2013) and further institutional redesign of China’s state asset management system are unlikely, despite recommendations that SASAC focus only on policymaking and oversight and that its state asset management responsibilities be transferred to state asset management companies (World Bank and State Council Development Research Center 2013, 27).

The potential for engagement with Singapore or other countries to affect China’s domestic economic policymaking is much weaker now than in the past. As a National University of Singapore researcher describes this change:

Increases in China’s own capacity are an important driver of this shift. With greater domestic expertise and experience, many in China feel there is simply less need to seek out and incorporate policy ideas and practices from abroad. Another reason is that different Chinese administrations have varied preferences regarding the introduction of ideas and practices from overseas. There is far less openness in this regard under current leader Xi Jinping, despite the continued official endorsement of people-to-people exchanges.¹³ In China’s SOE-backed state capitalist system, the international realm remains an important yet now less influential source of policy input.

Published online: April 30, 2024

I thank the Fulbright-Hays Faculty Research Abroad Program, the Chiang Ching-Kuo Foundation, and Indiana University’s Tobias Center for Innovation in International Development for generous research support. I am grateful to Bert Hofman and Zhang Chunlin for reading and commenting on earlier versions of this article, and to Davis Di for research assistance. I also thank Ja Ian Chong, James Tan, and the East Asian Institute (EAI) at National University of Singapore (NUS) for inviting and hosting me in Spring 2023. Support and feedback from NUS colleagues and EAI workshop participants were invaluable to this study.