Shanghai SOEs to merge amid reform drive

Two State-controlled companies in Shanghai announced Thursday that they will merge, marking the city's latest step to push forward with reform of its State-owned enterprises (SOEs).

Shanghai Lansheng Corporation said Thursday that it will merge with Shanghai Eastbest International (Group) Co. The Shanghai branch of the State-owned Assets Supervision and Administration Commission (SASAC) will transfer all of its holdings in Lansheng to Eastbest International, which is also controlled by the commission.

After the merger, the new entity will remain under the control of the Shanghai branch of SASAC.

Liang Ping, an analyst with Guangdong Academy of Social Sciences, told the Global Times Thursday that the merger would help the companies take advantage of each others' resources, but it is not a revolutionary step toward reform since both firms' controlling shareholder will remain unchanged.

"The merger will not allow any private capital into the new company, or significantly change the firms' board of directors and supervisors," he said. "The merger does not fulfill the goal of the reforms, which is to find a viable way to manage State-owned assets efficiently and to regulate SOEs without being influenced by political interests and conflicts."

Lansheng's share price surged on the Shanghai Stock Exchange by the daily limit of 10 percent Thursday.

According to details of reform plans made at the Third Plenary Session of the Communist Party of China Central Committee in mid-November, private capital will be allowed to buy stakes in State-backed companies and projects. This was seen as a major step forward for reform of the country's State-owned assets and SOEs.

Trading in some 10 listed companies owned by SASAC has been suspended since November to "prepare for major changes," the China Securities Journal reported Thursday, suggesting that the reform is already underway.

Shanghai will release its State-owned assets reform plan by the end of this year, the newspaper said, and other cities, including Shenzhen in South China's Guangdong Province and Southwest China's Chongqing Municipality are expected to reveal their plans next year.

Zhang Lei, a Beijing-based macroeconomic analyst with Minsheng Securities, told the Global Times Thursday that the merger represents an internal adjustment by the Shanghai branch of SASAC, and will not necessarily act as guidance for the city's future SOE reform.

"SASAC needs to strengthen its efforts to regulate the SOEs, while reducing its role in other areas such as human resource management and administrative affairs," Zhang said.