Acceleration of State-owned Enterprise Reforms Aims to Create World-Class Companies


The Chinese government has flagged further acceleration of mixed-ownership reforms of state-owned enterprises (SOE’s), with the goal of producing globe-bestriding conglomerates.

The report for the recent 19th National Congress of the Chinese Communist Party made reference to the need to “deepen reform of SOE’s, develop mixed-ownership economies, and train-up world-class enterprises that possess global competitiveness.”

In the immediate wake of the 19th National CCP Congress, China’s state-owned media is flagging further acceleration of SOE reforms, with an emphasis upon the creation of bigger and better government corporations that are capable of competing internationally.

“Market-based mixed-ownership reforms and restructuring are accelerating as part of the current round of SOE reforms,” reports Xinhua’s Economic Information Daily. “The number of enterprises participating in mixed-ownership reforms is continually increasing, their level is continually rising, while the industry sectors are continually expanding.

“In future the State-Assets Supervision and Administration Commission (SASAC) will continue to make mixed-ownership a breakthrough point for SOE reform.”

SASAC and various central SOE’s are reportedly aiming to rear a group of world-class enterprises with global ambitions by means of “horizontal mergers, vertical integration and specialised re-structuring.”

“China’s SOE’s are already becoming stronger and stronger,” said Hao Peng (郝鹏), secretary of the SASAC Standing Committee. “In future we need to set our sights on the entire world, and create world-class enterprises that possess global competitiveness.”

“In recent years central SOE’s have strengthened markedly, but if we set our sights on the international market, then our competitiveness needs to continually increase, said Li Mian (李锦), said chief researcher with the China Enterprise Research Institute.

Huang Danhua (黄丹华), vice-chair of SASAC, said that the presence of 48 Chinese central SOE’s on the Fortune 500 list of companies this year was “one manifestation of the scale effects exploited by central SOE’s in recent years via restructuring and integration.”

“In future SASAC will deeply advance structural optimisation, restructuring and integration…hastening increases to the quality and efficiency of SOE’s, and upgrading their operating models.”

SASAC data indicates that as of the end of 2016 a 68.9% of central SOE groups and their subsidiaries had mixed-ownership systems, while the figure for province-level state-invested enterprises and their subsidiaries was 47%.

“By means of integration with private capital on a larger scale, the function of the state-owned capital is constantly expanding, and the guidance role of the state-owned economy is coming further into play,” said Peng Huagang (彭华岗), vice-secretary of SASAC.

“The introduction of non-state-owned shareholders is expediting improvements to the management structure of SOE’s, and reinvigorating them.”

Peng said that the current round of reforms would focus on the power, oil, natural gas, rail, civil aviation, telecommunications and military sectors, involving mixed-ownership trial reforms for a total of 19 central SOE’s in two batches, with research and confirmation of third batch currently underway.

When it comes to overseas operations, SASAC data indicates that central SOE’s have over 6 trillion yuan in assets distributed amongst 185 overseas countries and regions, covering industries ranging from infrastructure outsourcing and resource development to railways, telecommunications and nuclear power.

Xi Jinping’s much-vaunted One Belt One Road initiative will serve to spur the presence of Chinese SOE’s abroad, with 47 central SOE’s taking part in a total of 1676 projects in participating nations.

A slew of leading central SOE’s, including CRRC Corporation, China Railway Construction, China National Petroleum and China National Machinery Industry , have expressed their support for accelerated expansion abroad, and are actively participating in One Belt One Road projects.

According to Economic Information the expansion of Chinese central SOE’s into other countries will serve to “vigorously raise China’s international speaking rights.”