Beijing Wants Foreign Capital to Invest in State-owned Enterprise Reform

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Beijing will further encourage the participation of foreign capital in structural and mixed-ownership reforms of China’s vast state-owned enterprise sector according to the latest reports from official government media.

Economic Information Daily, an imprint of the Xinhua News Agency, reports that China’s State-owned Assets Supervision and Administration Commission is currently preparing a slew of policies to facilitate and encourage the participation of foreign capital in the restructuring of key state-owned enterprises, including “streamlining of procedures and the loosening of restrictions.”

According to EID Beijing is intent on further expediting the participation of foreign capital in mixed-ownership reforms of state-owned enterprises – one of the key reform agendas for China’s economic policymakers at present.

“Encouraging foreign capital to participate in mixed-ownership reforms is on the one hand prompted by the vast room for acquisitions by foreign capital in China, which will become the main direction for attracting foreign investment,” said one source from SASAC to EID.

“On the other hand, it is also a mechanism for advancing the optimisation and adjustment of China’s state-owned enterprises, and is needed to increase their vigour.”

According to the source SASAC departments in various parts of China are already in the process of preparing a set of policies and plans that will make foreign investment in mixed-ownership schemes a future mainstay of reform.

The Shanghai municipal government recently released its “Several Opinions on Further Advancing Shanghai SASAC State-owned Enterprise Reform and Development,” which advocates that the city’s SOE’s seek the participation of foreign-invested and private enterprises as part of their ongoing structural adjustments.

Beijing has at the very least given lip service to expanding access to the Chinese market for foreign capital, as well as providing overseas players with a level playing field.

The State Council recently released the “Opinions on Establishing a Fair and Competitive Inspection System During the Establishment of a Market System” (关于在市场体系建设中建立公平竞争审查制度的意见), which seeks to reassure foreign investors about the fairness of China’s commercial regulatory environment.

The State Council also recently issued the “Notice on Several Measures to Expedite Growth in Foreign Investment” (关于促进外资增长若干措施的通知), which states that “the active use of foreign capital is a key part of China’s opening up strategy.”

According to the Notice Beijing will reduce thresholds and restrictions on foreign investment, make it easier for personnel to enter and leave the country, as well as improve the domestic investment environment, in order to “continually raise China’s advantage when it comes to attracting capital, and expedite the stable growth in attraction of foreign investment.”

Foreign investors have already had some involvement in the mixed-ownership reforms of state-owned enterprises, with Puluosi Investment Management (China) taking a 10% stake in the partial privatisation of Eastern Airline Logistics in June as a a strategic investor.

Prior to this foreign investors also participated in mixed-ownership reforms involving state-owned petroleum giant Sinopec and investment company CITIC Group.

Bai Ming, vice-head of the international market research department of the international trade and economic research academy of the Ministry of Commerce, said that attracting foreign investment will play a pivotal role in upgrading the Chinese economy and improving its ability to compete internationally.

According to Bai the use of foreign invested technology and overseas sales channels will increase the international influence of Chinese enterprises and further shore up its position as a manufacturing giant.

Mixed-ownership reforms will also expedite China’s shift towards a more market-dominated economy, a transition which has become one of the key goals of the Chinese Communist Party.

“The third plenary session of the 18th CPC Central Committee said that we must allow the market to play a decisive role in the allocation of profits,” said Bai.

“SOE profits are state profits, and these profits should be realised to the greatest extent possible via the market, and via a modern enterprise system.”

 

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