SOE Reforms Open Energy, Telecoms and Military Sectors to Private Investment

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Mixed-ownership reforms of China’s immense state-owned enterprise sector are opening the door for the first time to private investment in the country’s energy, telecommunications and military industries.

SOE mixed-ownership reforms lie at the very core of Beijing’s current efforts to adjust and upgrade China’s economic growth model.

Towards the end of September Xiao Yaqing, the chairman of the State-owned Assets Supervision and Administration Commission SASAC) said at a press conference that “mixed-ownership reforms are the breakthrough point for reform of state-owned enterprises,” flagging further policy initiatives ahead.

According to Xiao the goal of the upcoming round of mixed-ownership reforms will be to “obtains the strengths of various ownership systems and concentrate the advantages of various ownership systems, in order to grow state-owned enterprises.”

“Many outstanding private enterprises in China possess very good decision-making mechanisms and procedures, as well as outstanding management procedures and experience,” he said.

“Our state-owned enterprises possess very good foundations for growth and comprehensive innovation advantages. Everyone [should] reciprocate their respective advantages and integrate.

“The results of mixed-ownership reforms and other reforms all demonstrate that we have obtained immense successes and progress on the road to marketisation…consequently the current and future growth of central SOE’s will all be led by marketisation, using marketisation as the guide, to further increase competitiveness and direct enterprise development.”

Peng Huagang, SASAC vice-secretary and media spokesperson, said that mixed-ownership reforms differ from other reforms such as corporate structural reforms in that they seek to expand the market-oriented behaviour of state-owned enterprises.

Wang Jun (王军), chief economist of Zhongyuan Bank and a member of the academic committee of the China Center for International Economic Exchanges, said to Economic Observer that mixed-ownership reforms are likely to accelerate following the upcoming Chinese Communist Party Congress, bringing even greater investment opportunities in key industries to private capital.

“In future we can let state-owned capital to further advance mixed-ownership reforms in competitive fields, and by means of the joint efforts of state-owned capital and private capital further expand the total ‘cake’ of wealth.”

According to Wang mixed-ownership reforms will allow private capital to enter certain key sector for the first time, including power, oil, telecommunications, aviation and the military.

In August Meng Weizeng, vice-chair and media spokesperson for the National Development and Reform Commission’s research office said that “when it comes to mixed-ownership reforms our commission has worked with various departments to promote trial mixed-ownership reforms of the power, petroleum, natural gas, rail, civil aviation, telecommunications and military sectors, selecting a total of 19 enterprises for two sets of trials.”

SOE’s involved in the trial will include Zhongliang Capital, Zhongjin Zhubao, Huaneng Capital and China National Salt Industry Corporation.

One industry source said to Economic Observer that the reforms could see some of China’s leading Internet concerns, including Baidu, Alibaba Tencent and JD.com (BATJ), acquire equity stake in China Unicom in order to abet vertical integration and consolidation of its operations and expedite its future growth.

“Given that China Unicom is in the traditional telecommunications sector and enjoys a comparatively high level of monopoly control, this [reform] could release certain benefits to be shared by private enterprise, which is extremely praiseworthy,” said Wang Jun.

 

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