Superficial change won’t improve internal management: expert
The booth of China Unicom at PT Expo China, the nation’s largest and most influential telecoms event, in 2017 in Beijing.
China will deepen mixed-ownership reform of its State-owned enterprises (SOEs), with a third batch of pilot programs expected to cover more sectors and bring in foreign capital, according to Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission (SASAC).
“The central government will strengthen the market value management of SOEs mainly by injecting high-quality assets… The third batch of mixed-ownership reform pilot SOEs will deepen and cover more sectors compared with the first two batches,” Xiao told domestic financial news site cnstock.com on Monday.
He commented during this year’s two sessions of the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference, which are being held in Beijing.
China decided to launch mixed-ownership reform in 50 SOEs last year. The third batch will involve 10 subsidiaries of centrally administered SOEs and 21 local SOEs, the Shanghai Securities News reported in February.
More than two-thirds of the subsidiaries of central SOEs have achieved mixed ownership, the Economic Information Daily reported on Monday. It said these companies introduced private capital totaling more than 338.6 billion yuan ($53.46 billion) in 2017.
However, Feng Liguo, an expert at the China Enterprise Confederation, a think tank that closely advises the SASAC, warned of “superficial” mixed ownership.
“Though some SOEs have introduced private capital, the existence of sole majority shareholders hinders the improvement of corporate governance, limitation of power and the establishment of objective staff performance management systems. This doesn’t conform to the mixed-ownership reform requirements the central government proposed in a bid to improve SOE vitality,” he told the Global Times.
The mixed-ownership reform of group-level SOEs also faces barriers, Feng noted.
The central government sought comprehensive reform at telecoms carrier China Unicom in 2017, which has been seen as a test case for SOE reform.
According to a statement on China Unicom’s website on December 27, 2017, its number of departments was cut to 18 from 27 and the number of employees at its headquarters fell by more than half, from 1,787 to 865.
Wang Xiaochu, board chairman of China Unicom, said at a forum in Shenzhen, South China’s Guangdong Province in December that with the reform, China Unicom’s shares in its listed arms will decline from 62.7 percent to 36.7 percent, media reports said.
Group level mixed-ownership reform will be actively promoted in 2018, as it directly helps improve a group’s competitiveness and contributes to subsidiary-level reform, said Liang Jun, a research fellow at the Guangdong Academy of Social Sciences specializing in SOE reforms.
Liu Shaoyong, chairman of China Eastern Airlines, said in Beijing on Sunday that the group had submitted an application for group-level mixed ownership to the SASAC.
In January, Northeast China’s Liaoning Province announced support for local SOEs carry out group-level mixed-ownership reform and ordered “breakthroughs” in group-level mixed-ownership reform in provincial-level SOEs.
Reforms introducing mixed ownership in SOEs will be carried forward prudently, Premier Li Keqiang said Monday. “Our SOEs should, through reform and innovation, become front-runners in pursuing high-quality development.”
Li Jin, deputy head of the China Enterprise Reform and Development Society, said in a note sent to the Global Times on Monday that mergers of centrally administered SOEs will increase this year and efforts will be made to improve the competitiveness of SOEs’ main businesses.
Many central SOEs’ main business is weak, while their subsidiaries’ business is big, and that’s a big problem, according to Li.
“Developing their core business should be an issue that all centrally administered SOEs pay attention to,” he noted.
China Economic Weekly reported in September 2017 that the eventual number of centrally administered SOEs will be cut to 60 to 80, from the current total of 98.
– Global Times