China names 6 SOEs for pilot reforms

Six big state-owned enterprises (SOEs) will pilot reforms in ownership, management and supervision, Chinese authorities announced on Tuesday.

The companies are the State Development & Investment Corporation (SDIC), China National Cereals, Oils and Foodstuffs Corporation (COFCO), China National Building Materials Group (CNBM), China Energy Conservation and Environmental Protection Group (CECEP), Xinxing Cathay International Group (XXCIG) and China National Pharmaceutical Group (Sinopharm), according to the State-owned Assets Supervision and Administration Commission (SASAC).

The SDIC and COFCO will be "reorganized" to establish "state-owned asset investment companies" on a trial basis. Mixed-ownership pilot reforms will be carried out at Sinopharm and CNBM, said SASAC spokesman Peng Huagang at a press conference.

A more effective board of directors system will be set up at XXCIG, CECEP, Sinopharm and CNBM, and "disciplinary inspection teams" will be sent to another two or three unnamed SOEs, said Peng, who is also in charge of reform issues for the SASAC.

The "state-owned asset investment company" has been designed to make the "state," the SASAC in this case, a stake-holder instead of a manager of a SOE so as to raise the company's management and operation efficiency.

For mixed-ownership reform, SOE giants like China National Petroleum Co. and China Telecom have carried out their own plans to diversify corporate ownership and attract social funds.

The new board of directors system is meant to make the board act as the company's decision-making center while reducing the management entitlements of investors.

The SASAC will delegate a total of 21 management powers to the SOEs themselves later this month and more powers in September, a source familiar with the matter told Xinhua.

The main goal of the "disciplinary inspection teams" is to defend against "the loss of state-owned assets," Peng Jianguo, vice director of the Research Center of the SASAC, told Xinhua.

The reforms aim to "explore new state-owned asset management modes focused on the management of assets rather than the companies, find effective means for developing a mixed-ownership economy, improve corporate governance structure, and strengthen supervision of executives, Peng Huagang told reporters at the press conference.

The announcement came eight months after the Third Plenary Session of the 18th Communist Party of China Central Committee unveiled a sweeping reform agenda including bids to improve the management of state-owned assets and SOEs.

"The pilots signal that the reform of SOEs and state-owned assets has entered a new stage where top-level design and pilot reforms go hand in hand," said Peng Jianguo.

Echoing Peng, Li Jin, chief researcher at the China Enterprise Research Institute, hailed the announcement as a "major step in breaking the stalemate surrounding SOE reform at the national level, on which a consensus is yet to be reached among all decision-makers."

The unveiling of the list also came as when many local authorities have rolled out SOE reform plans but the central authorities are yet to unveil a nationwide reform program.

The source told Xinhua that big differences remain about what shape the reform plan should take.

While some people want to push the reform forcefully, other people "hope to maintain the status quo so as to mitigate economic slowdown and avoid possible "turbulence" in SOEs," the source said.

"Some SOEs want to push forward the reform prudently only after the central authorities have finished the 'top-level design,' he added.

Differences also exist at the top level, with ministries involved in the overhaul finding it difficult to agree on the plans "due to their different perspectives."

Taking the establishment of the state-owned asset investment company as an example, related sides are still at odds with each on whether to base it on Temasek, the investment company owned by the Singaporean government, or on China's own Central Huijin, said Peng Jianguo.

In Peng's view, neither model is suitable, and China should "blaze a new path through piloting which is suited to China's national conditions and the peculiarities of China's SOEs."

In response to concerns about the substance of the pilot reforms, Peng Huagang said they would neither be a "potted landscape" just for show nor a source of preferential policies.

The goal is to develop new systems, mechanisms and modes that can be copied elsewhere and provide practice support for deepening SOE reforms nationwide, he explained.