Tak­ing the lead once more

Shang­hai to again be at the fore­front as China moves to re­form their State-owned en­ter­prises

China Daily (Canada) - - SHANGHAI - By WANG YING in Shang­hai wang_y­ing@chi­nadaily.com.cn

Shang­hai’s Sta­te­owned en­ter­prises ( SOEs) are go­ing through a new round of re­struc­tur­ing and this will en­able them to fo­cus more on strate­gic in­dus­tries and boost their com­pet­i­tive­ness in the in­ter­na­tional mar­ket in the next five years, ac­cord­ing to ex­perts.

The cap­i­tal value of Shang­hai’s SOEs ac­counted for one­tenth of the to­tal in China. They also gen­er­ated oneeighth of the to­tal rev­enue by SOEs and con­trib­uted to 20 per­cent of prof­its made by such en­ter­prises. Ac­cord­ing to Chen Yong­ming, a pro­fes­sor from Shang­hai Ad­min­is­tra­tion In­sti­tute, th­ese fig­ures show that re­forms to SOEs in Shang­hai will likely have sig­nif­i­cant in­flu­ence on the na­tion’s econ­omy.

“The mu­nic­i­pal gov­ern­ment has a goal of in­creas­ing the pro­por­tion of strate­gic in­dus­tries, in­fra­struc­ture and as­sets re­lated to peo­ple’s liveli­hoods in the SOEs’ port­fo­lio from the cur­rent 67 per­cent to 80 per­cent in the next three to five years,” said Chen, adding that less rel­e­vant in­dus­tries will be phased out.

Th­ese strate­gic in­dus­tries, ac­cord­ing to Chen, re­fer to those in the in­no­va­tion, ad­vanced man­u­fac­tur­ing and mod­ern ser­vice fields.

It is es­ti­mated that Shang­hai’s SOEs have in­vested a to­tal of 354.56 bil­lion yuan ($54.8 bil­lion) through­out 2015, up 11.6 per­cent year-onyear, with about 80 per­cent hav­ing gone to strate­gic in­no­va­tive in­dus­tries. Ex­perts say that Shang­hai, which is tak­ing the lead among China’s SOEs in re­struc­tur­ing ef­forts, has made ef­forts in strik­ing a bal­ance be­tween prof­itable busi­ness and so­cial re­spon­si­bil­i­ties thanks to its years of ex­pe­ri­ence and pol­icy sup­port.

“There used to be a bias widely held by State-owned com­pa­nies that an en­ter­prise can­not make prof­its if it takes on so­cial re­spon­si­bil­i­ties at the same time. Such stereo­typ­i­cal opin­ions are not true,” said Zhang Huim­ing, a pro­fes­sor from Fu­dan Univer­sity who in­sists that as long as a com­pany is op­er­at­ing ac­cord­ing to mar­ket de­mand, so­cial re­spon­si­bil­i­ties will nat­u­rally be ful­filled as well.

The re­form of the city’s SOEs can be traced back to 1993, a time when Shang­hai had opened up its Pudong dis­trict for three years to at­tract for­eign-funded and

Zhou Xiaozhuang, pri­vately-owned com­pa­nies, said Yang Jian­wen, ex­ec­u­tive vice-pres­i­dent of the Shang­hai State- owned Cap­i­tal Op­er­a­tion Re­search In­sti­tute.

In 1993, the Shang­hai mu­nic­i­pal gov­ern­ment set up a State- owned as­sets su­per­vi­sion and ad­min­is­tra­tion of­fice, the for­mer en­tity of the State-owned As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion of Shang­hai Mu­nic­i­pal Gov­ern­ment, which was es­tab­lished in 2003. Ac­cord­ing to Zhang, the of­fice was de­signed to guide the oper­a­tions of the city’s ma­jor en­ter­prises and tackle prob­lems that arose dur­ing the de­vel­op­ment of the mar­ket econ­omy. To fur­ther boost the com­pet­i­tive­ness of SOEs, the mu­nic­i­pal gov­ern­ment has since 2013 drafted a slew of mea­sures to drive re­form.

“Re­cently, Shang­hai es­tab­lished two cap­i­tal op­er­a­tion and man­age­ment plat­forms, and they are ex­pected to shoul­der the re­spon­si­bil­ity of push­ing the SOEs to be more in­ter­na­tion­ally com­pet­i­tive and in­flu­en­tial,” said Zhou Xiaozhuang, a deputy re­searcher from Shang­hai Acad­emy of So­cial Sci­ences.

Ac­cord­ing to Zhou, the goal is to fi­nally de­velop five to eight multi­na­tional groups with strong in­ter­na­tional com­pet­i­tive­ness and good brand recog­ni­tion.

On Sept 13, the State Coun­cil un­veiled the long-awaited guide­line that called for more fo­cus on SOEs’ cap­i­tal re­turns and more tol­er­ance on mixed own­er­ship, or the in­tro­duc­tion of pri­vate or for­eign cap­i­tal into ex­ist­ing SOEs. On Nov 4, the State Coun­cil called for more ex­ten­sive re­forms of SOEs, urg­ing the au­thor­i­ties su­per­vis­ing such en­ter­prises to ac­cel­er­ate dereg­u­la­tion in or­der to im­prove ef­fi­ciency.

“The re­cent calls made by the cen­tral gov­ern­ment have in­di­cated that Shang­hai’s SOE re­struc­tur­ing is head­ing in the right di­rec­tion. What Shang­hai has done will pro­vide SOEs na­tion­wide pre­cious insight into achiev­ing the na­tion’s strate­gies and de­vel­op­ment goals,” said Zhou.

In the first half of 2015, Shang­hai’s GDP growth reached 7 per­cent, higher than its first-quar­ter read­ing of 6.6 per­cent, ac­cord­ing to the Shang­hai Mu­nic­i­pal Sta­tis­tics Bureau. Ex­perts note that such a growth can­not be pos­si­ble with­out State-owned com­pa­nies, which con­trib­uted to 58.8 bil­lion yuan worth of prof­its dur­ing this pe­riod, a 12.4 per­cent year-on-year in­crease. The to­tal rev­enue gen­er­ated by them dur­ing the first half of the year was 943.9 bil­lion yuan, with their as­sets to­tal­ing 3.95 tril­lion yuan as of the end of June, rep­re­sent­ing an 18.6 per­cent year-onyear growth.

The re­cent calls made by the cen­tral gov­ern­ment have in­di­cated that Shang­hai’s SOE re­struc­tur­ing is head­ing in the right di­rec­tion.”

deputy re­searcher from Shang­hai Acad­emy of So­cial Sci­ences


Ex­perts say that Shang­hai’s re­struc­tur­ing ef­forts will give SOEs na­tion­wide valu­able insight into achiev­ing China's strate­gic goals.

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