CHANG­ING HANDS

State com­pa­nies face spinoffs as part of own­er­ship re­forms

China Daily (Hong Kong) - - FRONT PAGE - By YAO JING yao­jing@chi­nadaily.com.cn

More State-owned en­ter­prises might be spun off as pri­vate en­ti­ties to help im­prove eco­nomic growth, but Bei­jing will main­tain con­trol over ma­jor in­dus­tries, a Cab­i­net of­fi­cial said Thurs­day.

Reg­u­la­tors are work­ing on plans to over­haul own­er­ship fol­low­ing the rul­ing party’s pledge to in­crease com­pe­ti­tion in State-dom­i­nated in­dus­tries last month, said Huang Shuhe, vicechair­man of the State-owned As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion of the State Coun­cil, the coun­try’s top reg­u­la­tor of SOEs.

Econ­o­mists say that Bei­jing must curb the dom­i­nance of State com­pa­nies that con­trol swaths of the econ­omy, from bank­ing to oil to steel pro­duc­tion, or risk see­ing China’s growth rate plunge. The de­vel­op­ment blue­print is­sued last month re­leased guide­lines to open up more in­dus­tries to com­pe­ti­tion, al­though it also said that State own­er­ship will re­main at the core of the econ­omy.

Huang did not say which com­pa­nies or in­dus­tries might be af­fected. The 117 com­pa­nies con­trolled by the Cab­i­net range from ar­eas re­garded by many coun­tries as strate­gic, such as oil or telecom­mu­ni­ca­tions, to travel agency and a food pro­ces­sor. They in­clude oil gi­ant PetroChina Ltd, phone car­rier China Mo­bile Ltd and four of the world’s big­gest banks.

“State-owned in­dus­tries that don’t re­quire State own­er­ship can al­low more ‘so­cial cap­i­tal’,’’ Huang said at a news con­fer­ence, us­ing the rul­ing party’s eu­phemism for pri­vate in­vest­ment. “State own­er­ship could be re­duced or en­tirely with­drawn.’’

Huang stressed that would ap­ply to only some com­pa­nies. He said those deemed “vi­tal to na­tional se­cu­rity” — a seg­ment the gov­ern­ment pre­vi­ously said in­cludes a wide range of com­pa­nies — would re­main en­tirely Sta­te­owned.

China’s eco­nomic growth slumped in the sec­ond quar­ter to a two-decade low of 7.5 per­cent. It re­bounded to 7.8 per­cent the fol­low­ing quar­ter, but an­a­lysts said that was due to in­creased gov­ern­ment spend­ing, and growth could fade again this quar­ter or early in 2014.

In the first 11 months of the year, debts of SOEs climbed 14.5 per­cent to 59.26 tril­lion yuan ($9.76 tril­lion), ac­cord­ing to a re­port re­leased by the Min­istry of Fi­nance on Thurs­day.

Huang said China will pro­mote a mixe­down­er­ship econ­omy by di­ver­si­fy­ing the share­hold­ing struc­ture of SOEs and speed up the trans­for­ma­tion of SOEs, es­pe­cially par­ent com­pa­nies, into joint-stock firms. It also will im­prove the share­hold­ing struc­ture of SOEs.

Some SOEs, State-owned cap­i­tal in­vest­ment com­pa­nies and cap­i­tal op­er­at­ing firms that are vi­tal to na­tional se­cu­rity will be wholly in­vested by State-owned cap­i­tal, ac­cord­ing to Huang.

“Ab­so­lute ma­jor­ity shares can be held by State-owned cap­i­tal for SOEs in ma­jor in­dus­tries and key fields that are the lifeblood of the econ­omy,” Huang said.

State cap­i­tal can hold a rel­a­tive ma­jor­ity of shares for im­por­tant SOEs in pil­lar sec­tors and new-tech­nol­ogy and high-tech in­dus­tries.

It can hold mi­nor­ity shares in or to­tally exit from SOEs that do not have to be con­trolled by State cap­i­tal and whose ma­jor­ity shares can be held with cap­i­tal from other sources.

“We will en­cour­age qual­i­fied SOEs to re­or­ga­nize and be­come listed through var­i­ous forms. SOEs that are not qual­i­fied for go­ing pub­lic can di­ver­sify share­hold­ing by in­tro­duc­ing dif­fer­ent kinds of in­vestors,” Huang said.

The com­mis­sion will pri­or­i­tize the work to de­velop a mixed-own­er­ship econ­omy, he said. “Since its es­tab­lish­ment, the SASAC has ac­tively en­cour­aged SOEs to in­tro­duce pri­vate cap­i­tal dur­ing their re­or­ga­ni­za­tion.”

By the end of 2012, 378 listed com­pa­nies were con­trolled by cen­trally ad­min­is­tered SOEs and their sub­sidiaries, while the stake of those firms held by the non-State sec­tor ac­counted for more than 53 per­cent of the to­tal.

Mean­while, non-State cap­i­tal held more than a 60 per­cent stake in 681 listed com­pa­nies con­trolled by lo­cally ad­min­is­tered SOEs by the end of last year.

But as the rep­re­sen­ta­tive of in­vestors, the func­tions and re­spon­si­bil­i­ties of SASAC have not changed, ac­cord­ing to Huang.

“This sig­nals a trans­for­ma­tion for the role of SASAC as it will no longer di­rectly ad­min­is­ter SOEs’ in­vest­ment ac­tiv­i­ties, as­set al­lo­ca­tion or busi­ness strate­gies,” said Han Bao­jiang, deputy di­rec­tor of the eco­nomic depart­ment at the Party School of the CPC Cen­tral Com­mit­tee.

“The SASAC will fo­cus on su­per­vis­ing and man­ag­ing cap­i­tal gains of State-owned cap­i­tal op­er­at­ing/in­vest­ment com­pa­nies,” said Han.

Huang said the com­mis­sion will deepen the re­form of the SOE man­age­ment mech­a­nism and fur­ther im­prove the mod­ern cor­po­rate sys­tem.

It also will strengthen State-owned as­set man­age­ment by steer­ing the fo­cus of su­per­vi­sion from SOEs’ op­er­a­tions to the use of Sta­te­owned cap­i­tal and in­creas­ing the per­cent­age of State cap­i­tal earn­ings that is given to cen­tral fi­nance.

The pro­por­tion of State-owned cap­i­tal gains that goes to pub­lic fi­nance will reach 30 per­cent by 2020, up from 5 to 15 per­cent for most SOEs. The As­so­ci­ated Press and Xin­hua con­trib­uted to this story.

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