SOEs face ‘red line’ on in­vest­ment Real es­tate, iron ore are among over­seas sec­tors to be off-lim­its

China Daily (Canada) - - FRONT PAGE - By ZHONGNAN in Bei­jing


China will draw a “red line” that for­bids its 102 ma­jor Sta­te­owned en­ter­prises from in­vest­ing over­seas in real es­tate, iron ore, petroleum and non­fer­rous metal, the coun­try’s top Sta­te­owned as­sets reg­u­la­tor said on Wed­nes­day.

As part of the coun­try’s SOE re­forms, the State-Owned As­set­sSu­per­vi­sio­n­andAd­min­is­tra­tion Com­mis­sion re­leased two doc­u­ments to fur­ther clar­ify SOEs’ in­vest­ment di­rec­tion, pro­ce­dures, risk con­trol and ac­count­abil­ity in do­mes­tic and over­seas mar­kets.

Huang Dan­hua, vice-chair­woman of the SASAC, said the com­mis­sion will es­tab­lish a neg­a­tive list to set the cat­e­gories for in­dus­tries that cur­rently are not al­lowed for in­vest­ment, while ear­mark­ing sec­tors for closer gov­ern­ment su­per­vi­sion.

A neg­a­tive list de­fines sec­tors that re­main off-lim­its to in­vest­ments, with ar­eas not on the list con­sid­ered to be open.

Heav­ily pol­lut­ing in­dus­tries, en­ergy and min­ing-re­lated busi­nesses that dam­age the en­vi­ron­ment or those af­fected by the fluc­tu­a­tion of global com­mod­ity prices will ei­therbe pro­hib­ited or strictly mon­i­tored by reg­u­la­tors.

In ad­di­tion, SOEs can­not in­vest in busi­nesses in which they are not spe­cial­ized. They must work with other com­pa­nies if they want to do so, ac­cord­ing to the doc­u­ments.

“The SASACen­cour­ages cen­tralSOEsto in­vest in fast-grow­ing sec­tors in­clud­ing high­speed rail­way, nu­clear power and high volt­age projects in over­seas mar­kets, as well as in­fra­struc­ture and man­u­fac­tur­ing projects such as roads, wa­ter­ways, telecom­mu­ni­ca­tion and high-end in­dus­tries,” saidHuang.

Cen­tral SOEs to date have in­vested 5 tril­lion yuan ($731.5 bil­lion) in more than 150 coun­tries and re­gions, mainly fo­cus­ing on the equip­ment man­u­fac­tur­ing, in­fra­struc­ture, power and trans­porta­tion sec­tors.

Deng Zhix­iong, di­rec­tor­gen­eral of the com­mis­sion’s plan­ning and devel­op­ment bureau, said that­be­causeof dif­fer­ent busi­ness scopes, all SOEs must es­tab­lish their own neg­a­tive lists as soon as pos­si­ble to meet gov­ern­ment de­mand.

The doc­u­mentsal­sode­mand that SOEs draw third-party in­vestors into their eq­uity struc­ture. Big-ticket projects must be as­sessed by in­de­pen­dent con­sult­ing com­pa­nies be­fore be­ing launched.

China’s to­tal out­bound di­rect in­vest­ment from the non­fi­nan­cial sec­tor jumped by 44.1 per­cent to $170.11 bil­lion last year com­pared with 2015, data from theMin­istry of Com­merce shows.

Tu Xin­quan, a pro­fes­sor at the Univer­sity of In­ter­na­tional Busi­ness and Eco­nomics, said SOEs’ in­fra­struc­ture and man­u­fac­tur­ing busi­nesses in over­seas mar­kets usu­ally en­tail mas­sive in­vest­ment and a long in­vest­ment re­cov­ery cy­cle.

“There­fore, this re­quires in­vest­ment and fi­nanc­ing in­no­va­tions and ro­bust fi­nan­cial risk pre­ven­tion mech­a­nisms,” he said.

The SASAC has set a tar­get for this year to raise the profit growth rate of cen­tral SOEs to be­tween 3 per­cent and 6 per­cent on a year-on-year ba­sis.

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