China on Sunday issued a guideline to deepen reforms of state-owned enterprises which included mixed ownership, in the latest move by authorities to make them more competitive and profitable in global markets.
China will improve the modernisation of state-owned enterprises (SOEs) enhance state assets management, promote mixed ownership and prevent the erosion of state assets, according to the guideline released by the Communist Party of China’s Central Committee and the State Council.
The government will improve the competence of SOEs and turn them into fully independent market entities, state-run Xinhua news agency reported. China’s massive SOEs dominated all sectors including energy, communications and financial sectors. Most of them are going global with massive investments. But this is the first time the government spoke of mixed ownership. Analysts in the state television, CCTV said more details were needed to know which of the sectors are actually marked for mixed ownership.
It will be a key framework document to guide and boost SOE reform, Xinhua report said. The reform came as most of them have turned into white elephants with excess staff and state subsidies. Details released by Xinhua said under new reforms the government will improve the competence of SOEs and turn them into fully independent market entities. The government plans to achieve major reforms in key areas by <g data-gr-id="39">2020,</g> when SOEs are expected to be more robust and influential and have greater ability to avoid risks.
“The government should nurture a group of SOEs that are creative and can face international rivals by that time,” the guideline approved by the CPC said. According to the guideline, China’s SOEs will be divided into two categories, for-profit entities and those dedicated to public welfare.
The former will be market-based and stick to commercial operations and should aim to increase state-owned assets and boost the economy, while the latter will exist to improve people’s quality of life and provide public goods and services.
In terms of mixed-ownership reforms, the government should introduce multiple types of investors so SOEs can achieve mixed ownership and encourage them to go public, it said.
No specific agenda on mixed-ownership reform will be set, but the government will promote it gradually, the guideline said.
Non-state firms will be encouraged to join the process through various means, including buying stakes and convertible bonds from or conducting share rights swaps with SOEs. SOEs will also be allowed to experiment with selling shares to their employees.
SOE boards of directors will have greater decision-making powers, managers will be more tightly supervised, and intervention by government agencies will be forbidden under the new guideline.