On November 8, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC, 国务院国资委) issued the ‘Guidelines on the mixed-ownership reform to the State-owned Enterprises (SOEs)’ (‘Guidelines’ for short).
According to the ‘Guidelines,’ all tiers of subsidiaries affiliated to SOEs are required to implement a mixture-ownership reform, through approaches such as property transfer, adding investment and stakes, expansion of capital and stocks, Initial Public Offering (IPO) and Material Asset Restructuring (MAR).
The ‘Guidelines’clarifies that for SOEs operating in a sufficiently competitive industry, state-owned capital is encouraged to choose whether to stay as controlling shareholders or not.
However, for those whose business lies in crucial industries and areas, the state-owned capital shall maintain its holding position, while the non-public capitals are supported to participate.
Previously, the continuously increasing credit risk of the State-owned Enterprises (SOEs) caused by their far from efficient practices in investment, operation and production has shed a looming shadow on the lurking systematic risk in China’s financial system.
The bulky economy needs a reform urgently that might inject the market mechanism into the tedious SOEs, to increase their flexibility and efficiency – a positive step for all parties’ (government, SOEs, non-public capital, shareholders) stakes.
Experts believe that the ‘Guidelines’ have strong operability, and are expected to play an important role in promoting the organic integration of state-owned and non-public capital as well as preventing transaction risks.
Up to now, the ‘Guidelines’ have already received positive responses. SOEs including Gree Electric (格力电器, 000651: SZ), State Power Investment Corporation (SPIC, 国家电投), China State Construction Engineering (中国建筑, 601668: SH) and Chang’an Automobile (长安汽车, 000625: SZ) have successively launched their planned mixed-ownership reform of either themselves or subsidiaries.
It is projected that the mixed-ownership reform of SOEs is soon expected to meet a slight peak.