From "External Brain" to "Internal General": Normalization of bidirectional exchanges between external directors of state-owned enterprises and current officials has been implemented.

In Q1 2026, adjustments to officials at central state-owned enterprises continued to send out important signals. This past February, China Railway Signal & Communication Corp. and China Reform Holdings—both central state-owned enterprises—released announcements confirming that full-time external directors of central state-owned enterprises would be appointed to the general manager positions. As more cases emerge of full-time external directors transitioning into incumbent senior executive roles, it signals that in the reform of state-owned assets and state-owned enterprises, the two-way exchanges between external directors and incumbent officials are becoming a routine and concrete reality. On January 15 this year, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) pointed out at a meeting of heads of local SASACs that efforts should be made to make better use of the talent pool of external directors for state-owned enterprises and to advance two-way exchanges between full-time external directors and incumbent leadership personnel with greater intensity.

An external director refers to a director who is nominated and recommended by a state-owned controlling shareholder in accordance with law and is served by someone other than an employee of the appointing company or its controlling subsidiary; prior to appointment, the person must not have been an employee of the company or its controlling subsidiary. Wu Gangliang, a researcher at the China Society for Reform and Development of Enterprises, told Securities Times that, based on the board’s decision-making mechanism, external directors participate in board resolutions in an independent capacity, serving as a check on major matters from the perspective of investors.

In October last year, Wu Shengyue, a full-time external director of a central enterprise (who previously served as an external director for Sinochem, General Technology, and Mining Metallurgical Technology), was appointed deputy party secretary, director, and general manager of China Poly Group. This appointment is viewed as the first concrete case of a central state-owned enterprise external director shifting from an “outsider brain” to an “insider force.”

Entering 2026, this reform adds another new case. On February 13, China Reform Holdings announced that, based on the resolutions of the board’s second meeting in 2026 (the first extraordinary meeting), Hou Xiao was appointed as the company’s general manager. Hou Xiao had previously served as an external director of China Reform Holdings, China Minmetals, China Travel Service, and China National Travel Group. On February 27, China Railway Signal & Communication Corp. issued an announcement stating that the company’s board of directors approved the appointment of Dong Baoliang as president and nominated him as an executive director. From July 2024 to February 2026, he served as an external director of First Automobile Group Co., Ltd., and an external director of China Automotive Technology Research Center Co., Ltd.

“Currently, the chairmen of state-owned enterprises are generally full-time positions, and the general managers generally also enter the board as executive directors; they are internal executive directors. External directors generally do not participate in the company’s day-to-day operations and management; their main role is to provide functions such as decision-making, consultation, and supervision, to a certain extent forming constraints on internal directors.” Wu Gangliang said that all three leaders directly moved from full-time external director positions into incumbent senior executive posts, demonstrating the implementation of reform policies for the two-way exchange mechanism, and also showing that serving as an external director no longer means “stepping into retirement-tier work.”

Zhiben Consulting, in its research on corporate governance and control for state-owned enterprises, pointed out that in previous practice it was found that if external directors only served as a “transitional position before retirement” or a “honorary nominal role,” their role would likely be greatly discounted. The establishment of the two-way exchange system has enabled external director teams to shift from “honorary placement” to “strategic reserves.”

The establishment of a two-way exchange mechanism between external directors and incumbent officials is not something that happens overnight; rather, it has gradually taken shape through policy evolution and practical exploration. Zhiben Consulting’s research institute for corporate governance and control of state-owned enterprises believes that, to date, it can roughly be divided into three stages:萌芽,确认, and落地.

The initial stage includes: from 2020 to 2022, as the three-year action for the reform of state-owned enterprises was pushed forward in depth, board construction became an important part of reform of institutional mechanisms; and in the reform deepening and enhancement action that began in 2023, it further clarified and optimized modern corporate governance of state-owned enterprises, improving mechanisms for the selection, evaluation, and incentives/constraints of external directors, thereby linking the building of external director teams more closely with their professional career paths.

In 2024, a central enterprise board construction work meeting explicitly put forward the goal of “building a scientific, rational, and efficient board,” and also clearly required to “plan in an integrated manner for external directors as an important component of the enterprise leadership team.” After that, various local state-owned asset entities also issued policies one after another, clearly stating requirements for “two-way exchanges.”

The institution believes that, judging from cases of the appointment of general managers at China Reform Holdings and China Railway Signal & Communication Corp., the selection of officials in state-owned enterprises and the development of external directors show new characteristics. Due to the constraints of age upper limits and the term of appointment, the traditional approach of selecting external directors from deputy officials at the same-level central enterprises is difficult to match age requirements, so a new path has emerged: selecting outstanding young incumbent leaders from secondary-level units of central enterprises to be promoted into full-time external directors; after nurturing through governance experience and undergoing evaluation and assessment, then promoting them to group-level principal positions. This model is worth推广. External director roles will become the prerequisite and the connecting link for incumbent leadership personnel at enterprises—especially for principal general managers. The importance of external director positions is self-evident, as is the importance of external director governance work; accordingly, the effectiveness of state-owned enterprise governance systems is further highlighted.

In the future, more first-tier state-owned enterprise groups under additional state-owned asset regulatory institutions will generate more practices in which full-time external directors serve as principal leaders such as general managers. China National Chemical Engineering Co., Ltd. and China Agricultural Development Group both have made deployments and arrangements for two-way exchanges between full-time external directors and incumbent corporate leaders.

However, Wu Gangliang also pointed out that currently, external directors at central state-owned enterprises are appointed and removed by the State-owned Assets Supervision and Administration Commission of the State Council, while some key persons in charge of central enterprises are appointed by organizational departments. Therefore, even two-way comprehensive exchanges between these two kinds of positions still need to be further straightened out within relevant institutional arrangements.