China issues state-firm reform plans, expects results by 2020

China president, Xi Jinping

China president, Xi Jinping

CHINA issued some details on Sunday on plans to reform state-owned enterprises (SOEs), including the introduction of “mixed ownership” by bringing in private investment, and said it expected decisive results by 2020.

Reform of mammoth state-owned firms is one of China’s most pressing tasks as growth slows in the world’s second-largest economy.

The guidelines, jointly issued by the Communist Party’s Central Committee and the State Council, China’s cabinet, include plans to clean up and integrate some state firms, the official Xinhua news agency said. But it did not give any details of which firms will be merged.

The government will not use forceful means to push the “mixed ownership”, nor it will set a timetable, giving each firm the go-ahead only when conditions are mature, it said.

State firms will be allowed to bring in “various investors” to help diversify their share ownership, and more state firms will be encouraged to restructure to pave the way for stock listings, Xinhua said.

Private investors will be encouraged to buy stakes in state firms, buy convertible bonds issued by state firms, or swap shares with state firms, it said, adding that steps will be taken to curb corruption during reforms.

Chinese private companies are seen as more efficient and innovative than state-owned firms, which enjoy easier access to government policy support, subsidies and bank loans.

The government aims to “cultivate a large number of state-owned backbone enterprises with innovation capability and international competitiveness,” Xinhua said, indicating the reforms will not amount to full-scale privatization.

The step comes nearly two years after President Xi Jinping called for market forces to play a decisive role in better allocation of resources in the world’s second-largest economy.

China will push firms to merge and sells shares as part of the most far-reaching reforms of its sprawling and inefficient state sector in two decades, according to documents seen by Reuters last week.

China’s state enterprises are dominated by 111 central government-owned conglomerates, which account for about 60 per cent of SOE revenue and are overseen by the State-owned Assets Supervision and Administration Commission (SASAC).

Earlier this year, state media said the number of central government conglomerates could be cut to 40 through mergers.



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