China’s State-owned Enterprise Reforms Aim to Increase Share in Strategic Emerging Industries

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Chin has recently stepped up its reform and restructuring of central state-owned enterprises (SOEs) in sectors considered to be of strategic importance, with the goal of creating “world-class enterprises” that have a greater market share in key industries.

SASAC focuses on strategic emerging industries

Zhang Yuzhuo (张玉卓), chair of the State-owned Assets Supervision and Administration Commission (SASAC), said in recent article that the authority will “actively cultivate and strengthen strategic emerging industries, striving to increase the share in strategic emerging industries of central SOEs by more than 2 percentage points by 2023.”

The authority will also formulate guidelines for adjusting the structure of key industries, driving a rise in the share of central SOEs in key industries related to national security and people’s livelihood by at least 1 percentage point in 2023.

Other key fields subject to specialisation and integration of SOEs in 2023 include equipment manufacturing, inspection and testing, pharmaceuticals and healthcare, mineral resources, engineering contracting, coal power, and clean energy, to effectively improve industrial competitiveness.

SASAC has called for “enhancing the overall competitiveness of the industrial chain through market-oriented mergers and acquisitions and restructurings, as well as accelerating restructuring in key areas such as integrated circuits, industrial automation, and artificial intelligence.”

Figures from SASAC indicate that in 2022 central SOEs undertook 1,272 specialisation and integration projects, including 803 “internal resource integration projects” within central enterprises, 154 integration projects between central enterprises, 138 integration projects between central and local enterprises, and 177 external resource integration projects.

Central SOEs sign raft of integration projects in March

On March 29th, 17 central SOEs and 4 local SOEs signed contracts for 11 specialized integration projects across multiple fields, including clean energy, mineral resources, ecological protection, and healthcare.

“We will carry out specialisation and integration in a larger scope, wider fields, and at a higher level,” said Weng Jieming (翁杰明), Vice Chairman of SASAC, at the signing ceremony for the latest round of SOE reform projects.

“The goal is to accelerate the development of world-class enterprises by highlighting the improvement of core competitiveness and functions, focusing on key elements such as technology, efficiency, talent, and branding, and aiming at the four functional areas of strategic security, industrial leadership, national economy and people’s livelihood, and public services.

The move came after after 14 central SOEs entered partnerships for 22 “new energy smart operation and maintenance service cooperation projects” at the start of 2023.

The latest round of projects signed in March seek to accelerate the integration of resources between central and local SOEs, and include:

  • State Development and Investment Cooperation and China Merchants Group undertaking restructuring and cooperation on the China Merchants Property project.
  • Southern Power Grid Corporation and China Resources Group agreeing to cooperation on the Guizhou healthcare project.
  • China Tourism Group and China National Pharmaceutical Group engaging in cooperation on duty-free operations.
  • China Three Gorges Group’s subsidiary, Yangtze River Ecological Environment Protection Group, and Suzhou Wujiang Water Affairs Group jointly launching Suzhou Wujiang Three Gorges Water Steward Co., Ltd. (苏州吴江三峡水管家有限责任公司), with both parties holding 50% of the shares

“With the specialisation and integration reforms, some projects aim to enhance energy and resource security, some aim to enhance scientific and technological innovation capabilities, and some aim to increase the ability to service living standards, effectively enhancing security support, scientific and technological innovation, and industrial control capabilities of central state-owned enterprises,” said Zhu Changming (朱昌明), senior partner of Sunshine Law Firm and head of the State-owned Enterprise Mixed Ownership Reform and Employee Shareholding Research Center (国企混改与员工持股研究中心).

“By integrating professional resources and industrial resources, we can lead and drive enterprises under various types of ownership to accelerate the development of modern industrial systems.

“This is of great significance for promoting the high-quality development of state-owned enterprises and optimizing the structure of the state-owned economy.”