China’s State-owned Assets Supervision and Administration Commission is working on plans to reduce the number of central state-owned enterprises from over 100 to just over 80, as well as divide them into three key categories.
Caixin reports that SASAC is currently in the process of drafting documents to support trial reforms of the state-owned sector, slated for release prior to the end of the year.
SASAC plans to divide all central state-owned enterprises into the three categories of industry groups, investment companies and operating companies, as well as reduce their total number from to roughly 80 concerns in total.
According to Wendy Leutert in a paper on China’s SOE’s written for the Brookings Institute, the total number of central state-owned enterprises stood at 106 at the start of 2016.
Caixin reports that the reforms envisage the creation of a total of over 50 industry groups, over 20 investment companies, plus several operating companies, which will require extensive merger and restructuring of existing central SOE’s.
SASAC chair Xiao Yaqing reportedly mooted the reorganisation of central SOE’s into the three categories last year.
Investment companies will be entrusted with fostering the development of a number of diversified industries, exploring strategic emerging sectors, and combine production with financing, with existing examples including State Development & Investment Corp., China Merchants Group, food processor COFSC Group and China Poly Group.
Operating companies will focus on “value preservation and value add,” as well as the “stimulation of assets” and “equity and capital operation.”
The largest category of industry groups will engage in the focused development of designated industries that have a major impact on the private economy or national security, or relate to China’s “integrated strength” and international competitiveness.
Such groups will seek to combine upstream and downstream industry segments and engage in industry integration, with current examples including the three main state-owned oil companies of CNOOC, PetroChina and SinoPec, as well as the the two main power companies of China Southern Power Grid and State Grid Corporation of China.
The projected reforms follow the release of the “Guidance Opinions on Deepening the Reform of State-owned Enterprises (Document 22) in September 2015, which provide an overarching framework for restructuring of China’s state-owned enterprise sector.
Document 22 makes reference to the restructuring of state-owned investment and operating companies, as well as the professional duties that are lawfully exercised by SOE regulators in their capacity as capital contributors. This is reportedly the basis for SASAC’s current division of China central SOE’s into three separate categories.