Central State-owned Enterprises Targeted for Overcapacity Reductions in Four Key Industries

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China’s reforms of its central state-owned enterprises will focus on output reductions in the four key industries of non-ferrous metals, shipbuilding, oil refining and building materials in 2018.

The Chinese government flagged the overcapacity reductions at both the “2017 Central SOE Economic Operating Conditions” press conference held by the State-owned Assets Supervision and Administration Commission (SASAC) on 17 January and the “Central SOE and Local SASAC Executives Meeting” held on 15 January.

Analysts say SASAC will release new targets for overcapacity reductions in these four sectors for 2018, making them key areas for restructuring and mixed-ownership reforms in 2018.

“The mention of these four sectors indicates that new targets for overcapacity reductions in 2018 have already been confirmed,” said Li Mian (李锦), chief researcher with the China Enterprise Research Institute (中国企业研究院), to Shanghai Securities Journal.

“The state-owned economy began to enter an L-shaped bottom in October 2016, and the overall performance of SOE’s has improved.

“At present, the state-owned economy has entered a high-quality development phase, and the performance of central SOE’s is improving, which is in no way unrelated to the dividends reaped by reforms.

“In the past year, SASAC’s supply-side structural reforms have made the [SOE sector] leaner and healthier, as wells improved quality and efficiency, while breakthroughs have been achieved in relation to key issues and challenges confronting SOE reforms.”

SASAC chief accountant Shen Ying (沈莹) said that during the process of driving overcapacity reductions amongst SOE’s, SASAC would not only dispense with backwards capacity, it would also withdraw low-efficiency or inefficient capacity.

According to Shen steel and iron overcapacity work has basically been completed, while the next step would be to use modern technology to improve and upgrade the sector.

The coal sector exceeded its overcapacity reduction targets for 2017 with a 12.65 million ton removal. Reduction of overcapacity in the coal sector is set to continue in 2018, with a targeted reduction of at least 10 million tons, and a focus on further restructuring.

Analysts also expect SASAC to launch central SOE restructuring in other sectors including communications, industrial chemicals, environmental protection and maritime equipment.

 

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