Taking the lead once more
Shanghai to again be at the forefront as China moves to reform their State-owned enterprises
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.