Local State-owned Enterprises Included in Third Round of Mixed-ownership Reforms

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China is accelerating reform of its state-owned enterprise sector, with finalisation of the list of government companies for the third round of mixed-ownership trials

On 15 November Meng Hui, spokesperson for China’s National Development and Reform Commission, announced that the State Council had given its approval to a list of 31 SOE’s that will participate in the third round of mixed-ownership reforms.

While the list itself has not been publicly released, Meng said that the 31 companies would include both local government companies as well as central SOE’s, marking a departure from the first two rounds of trial reforms.

A total of 19 central SOE’s have already been included in the first two rounds of mixed-ownership trials, of which over one third have already completed initial reform work, including new investment, the establishment of new companies, restructuring of corporation administration, or the creation of internal incentive mechanisms.

According to Meng Hui these trials have already proved effective at markedly reducing the leverage ratios of participating SOE’s, as well as improving their business performance.

“The implementation of reform trial plans for companies such as China Unicom and EAL has generated a positive market response,” she said.

The inclusion of local SOE’s in the third round of mixed-ownership trials sends a clear signal that Beijing is intent upon expanding the reforms to a greater share of the nationwide sector, which encompasses several tens of thousands of regional companies.

The state-owned enterprise sector lies at the core of ongoing reforms by China’s government to raise economic efficiency and upgrade the country’s growth model.

Mixed-ownership is in turn a key part of SOE reforms, with the State Council hoping that the participation of private capital will help modernise these companies by “improving administration, strengthening incentives…[and] raising efficiency.”

At the 19th National Chinese Communist Party Congress in November, President Xi Jinping made reference to the need to “deepen reform of state-owned enterprises, develop a mixed-ownership economy, and cultivate world-class companies capable of competing internationally.”

Just prior to this the State Council released its “Opinions Concerning State-owned Enterprise Development of a Mixed-ownership Economy” (关于国有企业发展混合所有制经济的意见), which designated seven key sectors for trial reforms, including electricity, oil, natural gas, railways, civil aviation, telecommunications and the military. 

Official figures indicate that the number of Chinese SOE’s with mixed-ownership has steadily increased in recent years, accounting for 68.9% of all central SOE’s and 47% of local SOE’s. 

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