Gov't to launch pilot reforms in energy, railway, military industries
Mixed-ownership reform, an integral part of China's reforms for its State-owned enterprises (SOEs), will soon be carried out in more than seven domestic industries, showing the importance of this round of SOE reform, experts noted on Sunday.
The central government will launch pilot mixed-ownership reforms in areas such as electric power, oil and gas, railways, civil aviation, communications and military industry, Liu He, deputy head of the National Development and Reform Commission (NDRC), was quoted as saying in a statement from the NDRC on Saturday.
Premier Li Keqiang also said at a meeting on Friday that SOE reforms are crucial, Xinhua reported on Sunday. He noted the importance of mixed-ownership reforms and said that the sector should be more efficient.
According to Liu, the government will further "optimize" the country's State-owned economy by achieving better integration of SOEs with the market economy, as well as encouraging different ownership structures.
The mixed-ownership model is an equity structure that allows non-State participants such as private firms and foreign investors to hold shares in a State-owned company.
Liu's comments came shortly after China unveiled official guidelines for further reform of the country's State-owned sector on September 13.
According to the guidelines, the central government will encourage shareholding diversification to propel mixed-ownership reform. More opportunities will also be created to encourage SOEs to float on the market in their entirety, as opposed to merely listing individual units of the companies.
The government also plans to allow employees at some SOEs to get shares in their companies, China Business Journal reported on September 9.
Zhong Dajun, director of the Beijing Dajun Institute for Economic Observation, told the Global Times on Sunday that mixed-ownership reform has been launched with the aim of injecting new "vigor" into SOEs.
"In recent years, many SOEs have been mired in corruption scandals and have seen unsatisfactory business performance. Therefore, the government wants to improve SOEs' economic performance as well as their sense of social responsibility by introducing private capital into the enterprises," Zhong said.
"The implementation of a mixed-ownership structure will increase the financing channels for SOEs, giving them more capital," he noted.
But Zhong also pointed out that some companies in the public services sector have relatively low market returns, which means they are of less interest to private investors.
According to the SOE reform guidelines, China's SOEs are split into two groups: those that seek commercial interests and those that serve public interests.
Tian Yun, a research fellow with the China Society of Macroeconomics under the NDRC, told the Global Times on Sunday that some of the areas in which there will be pilot mixed-ownership reforms will be in the public services and national security industries, so reforms in these specific areas will be limited.
But Tian said the reforms would still offer benefits for these industries. "In the military industry, for example, a certain level of privatization would facilitate Chinese military companies' purchase of overseas technologies," Tian noted.
Xu Hongcai, an expert at the China Center for International Economic Exchanges, told the Global Times on Sunday that the pilot mixed-ownership reforms will also be conducted in a number of profitable sectors that are currently considered to be dominated by powerful SOEs.
"The biggest obstacle to mixed-ownership reforms in those companies is how to establish a transparent and standard operating system," Xu noted.
The reforms have already begun at some of the companies. In June, China's largest oil and gas producer, China National Petroleum Corp, launched several reform measures, such as expanding the business autonomy of some of its subsidiary companies, the 21st Century Business Herald reported on July 1.
China Petrochemical Corp also started carrying out mixed-ownership reforms in 2014 and had collected 105 billion yuan ($16.5 billion) from about 25 private investors as of March 7, according to a company filing with the Shanghai Stock Exchange.
"The feasibility and results of the reforms are yet to become fully clear," Zhong noted.
The current round of SOE reforms will affect about 150,000 SOEs, which hold over 100 trillion yuan in assets and employ more than 30 million people.
