SOE ownership to reform

By Song Shengxia Source:Global Times Published: 2013-12-20 0:53:01

Most of China's State-owned enterprises (SOEs) will be reformed into enterprises of mixed ownership with only a few SOEs "vital to national security" remaining solely owned by the State, an official with the country's State assets regulator said Thursday. 

China is working on a plan to promote a mixed ownership economy and speed up reforms to diversify the shareholding structure of SOEs, Huang Shuhe, vice chairman of the State-owned Assets Supervision and Administration Commission (SASAC), said at a press conference Thursday.

Huang categorized four types of SOEs whose shareholding structure will be further optimized. 

A few SOEs, State-owned capital investment companies and State-owned capital operating companies that are vital to national security will remain solely owned by the State, Huang said.

State capital must hold the absolute controlling stake in SOEs that serve as the lifeblood of the economy and remain in key industries and sectors, according to Huang.

It also must hold a relative majority of shares in SOEs that are in pillar industries and high technology industries, he said.

In SOEs which do not require State capital control and whose share can be controlled by social capital, State capital can hold shares in or totally withdraw from them, he noted. 

But Huang did not specify which companies and industries will be affected nor give a timetable as to when State capital will withdraw to allow social capital to take a controlling stake in some firms. 

"We are working on the plan which will ensure one strategy for one firm," Huang said.

"The clear boundary of the four categories is yet to be defined by SASAC and other government agencies, and it will take time because some SOEs operate across several sectors and industries," Zhou Fangsheng, a vice director of China Enterprise Reform & Development Society, told the Global Times Thursday.

Huang's remarks came after Shanghai unveiled guidelines for SOE reforms on Tuesday, which said Shanghai will invest 80 percent of its State-owned assets in key industries, including advanced manufacturing, infrastructure and the modern service industry.

"The four categories outlined by SASAC Thursday is a fresh breakthrough in the country's SOE reform and an active response to the reform agenda set at the Third Plenary Session of the 18th Communist Party of China (CPC) Central Committee last month," Zhang Chunxiao, a professor at the Chinese Academy of Governance, told the Global Times Thursday. 

China pledged to develop a mixed ownership economy which features cross shareholding of State capital, collectively owned capital and non-public capital, according to the reform decision released on November 15 by the plenum.

"The message from Huang suggested SOEs critical to national defense and security will be solely owned by the State. There are only around 10 such companies which include the final assembly plants of SOEs in national defense and military industries but exclude supporting companies," Zhou said.

According to Zhou, the second category, which serves as the lifeblood of the economy, may include the State electric grid, oil, telecommunications, railways and tap water supply. The State shares will be reduced from currently almost 100 percent to above 51 percent," Zhou said. 

"A relative majority of shares in SOEs in pillar industries and high technology industries means State shares may be reduced to as low as 20 percent as long as State capital remains the major shareholder," he said. 

A total of 52 percent of central government-administered enterprises and their subsidiaries have introduced non-public capital to form enterprises of mixed ownership, Huang said.

Liang Jun, a research fellow at Guangdong Academy of Social Sciences, told the Global Times Thursday that although some economists have previously said that China's SOE reforms have stalled for more than a decade, Huang's remarks prove that this is not the case.

Huang also said at the conference that SASAC is working on a plan to increase the SOE dividend payout ratio in 2014.

Currently, the SOE dividend payout ratio varies from zero to 15 percent. 

China will raise the SOE dividend payout ratio up to 30 percent by 2020, according to the reform package released last month.

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