Mixed-ownership SOE reform looms

It is pushed by factors including the country's Belt and Road Initiative, 'going global' strategy and Made in China plan

Mixed-ownership reform of a number of central State-owned enterprises is expected to be approved within the third quarter of this year, as the coal, steel, heavy equipment and thermal power sectors will become the government's priority in restructuring its giant SOEs, experts said on July 4.

Mixed-ownership reform acts as a major part of the overall reform of SOEs. It is pushed by factors including China's ongoing supply-side reform, the Belt and Road Initiative and many Chinese companies' "going global" strategy, as well as the Made in China 2025 plan.

A group of central SOEs, including China National Aviation Holding Co, Power Construction Corp of China and China National Cereals, Oils and Foodstuffs Corp, have already started to draft plans for mixed-ownership reform.

"Even though it is still at an early stage, central SOEs will face issues including monopoly and the placement of employees during the process of mixed ownership reform. But as these enterprises are all strong and competitive, they have the ability to solve problems such as employee placement," says Li Jin, chief researcher at the China Enterprise Research Institute.

"As for the monopoly issue, we cannot expect it to be solved in the short term. We can and will promote it gradually."

A total of 91 central SOEs achieved a rise in revenue during the first quarter of this year, with 54 of them, including defense-related industries, construction materials, pharmaceuticals and modern services, witnessing a rise of 10 percent or more, and sectors such as oil, steel and coal experiencing an increase in revenue of at least 40 percent.

"It is imperative that the coal industry starts to restructure this year. Central SOEs in the coal industry will integrate coal resources at the central level, and then at provincial level," Li says.

In terms of heavy equipment, China First Heavy Industries Co, Harbin Electric Corp and Dongfang Electric Corp are likely to integrate, as the majority of their business is similar.

"Against a backdrop of tackling overcapacity, there's a growing likelihood that China State Shipbuilding Corp and China Shipbuilding Industry Corp, two major Chinese companies, will merge," Li says

He Jingtong, a business professor at Nankai University in Tianjin, says that mergers and consolidations will take place in power companies affiliated with the five big power generation giants - China Datang Corp, Huaneng Power International Inc, Huadian Power International Co, GD Power Development Co and State Power Investment Corp.

The State-owned Assets Supervision and Administration Commission said recently that China Hi-Tech Group Corp has been merged with China National Machinery Industry Corp (Sinomach). Sinomach produces construction and agricultural equipment, while China Hi-Tech is a textile machinery manufacturer.

zhongnan@chinadaily.com.cn

(China Daily European Weekly 07/07/2017 page29)