Chinese Internet Giants Want Stakes in State-owned Enterprise Mega Fund


Analysts say that ongoing mixed-ownership reforms of China’s central state-owned enterprises could see the increasing participation of the country’s leading Internet giants, producing complementary business relationships that benefit both sides. reports that China’s central government is planning to establish a new fund worth at least 100 billion yuan (approx. $15.27 billion) to promote the mixed-ownership reform of large-scale state-owned enterprises that are currently under the direct control of Beijing.

While the precise scale and management structure of the fund awaits approval by the State Council, unlike many other funds for advancing SOE reforms the new vehicle will no longer be restricted to other central or local SOE’s, but is expected to allow private companies, or even multi-national corporations, to become cooperative partners.

Analysts such as Pan Helin, an expert in applied economics from the Chinese Academy of Fiscal Sciences, points out that a new trend in the current round of SOE mixed-ownership reforms has been the ceding of majority equity holdings to private investors.

The Chinese triumvirate of Internet giants comprised of Baidu, Ali Baba and Tencent (BAT) have now reportedly expressed keen interest in the new SOE mega-fund, following their involvement in the mixed-ownership reforms of China Railway and China Unicom.

Li Mian, chief researcher with the China Enterprise Research Institute (中国企业研究院) said to that BAT’s enthusiasm for the proposed mega-fund marks the emergence of a new reform model combining mixed-ownership reforms with Internet companies.

According to Li cooperation between central SOE’s and China’s e-commerce giants is a mutually complementary business arrangement that will naturally benefit both parties.

Central SOE’s are traditional companies that are primarily concentrated in mainstay sectors such as manufacturing, and possess natural advantages when it comes to offline networks but still lack channels for online expansion.

On the other hand E-commerce companies need to continually expand their access to goods, resources and market  in order to maximise the value of their onine platforms,

Cooperation with e-commerce giants would give central SOE’s access to a greater volume online channels and data, as well as new business and administrative methods that could help to make them more market-oriented and efficient.

Li points out that e-commerce companies are constantly struggling for greater influence and sway on the sales side, which is what many central SOE’s possess in spades

“The model of mixed-ownership reforms plus the Internet is becoming the hallmark of current reforms,” said Li.

Li notes, however, that fostering cooperation between central SOE’s and China’s Internet giants will be no easy task given marked disparities in the way that government and private business operates, as well as entrenched opposition to the reform process.

“It’s hard to say who will be play the more active role during the process of e-commerce companies participating in central SOE mixed-ownership reforms…it’s obvious that both parties will have their own needs and concerns,” said Li.