Cen­tral SOEs re­form will be done in 2017

China Daily (Hong Kong) - - FRONT PAGE - Con­tact the writ­ers at huy­ongqi@chi­nadaily.com.cn By HU YONGQI and ZHENG XIN

With some ex­cep­tions, China will in­clude all cen­tral State-owned en­ter­prises that have not been re­formed in a mod­ern cor­po­rate sys­tem by mak­ing them le­gal per­sons by the end of this year. The ex­cep­tion will be those in the fi­nan­cial and cul­tural sec­tors. The move is ex­pected to help clear away in­sti­tu­tional bar­ri­ers for fur­ther SOE re­form.

The move, giv­ing cor­po­ra­tions the same rights and re­spon­si­bil­i­ties as peo­ple, was an­nounced by the State Coun­cil on Wed­nes­day.

It is part of the im­ple­men­ta­tion plan for com­pany sys­tem re­form for cen­tral SOEs, which refers to those di­rectly ad­min­is­tered by the Sta­te­owned As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion, the coun­try’s top SOE reg­u­la­tor.

It was also the lat­est move since the re­form was mapped out at the Cen­tral Eco­nomic Work Conference in De­cem­ber and in the Gov­ern­ment Work Re­port that Premier Li Ke­qiang de­liv­ered in March.

“By the end of 2017, all cen­tral SOEs, ex­cept fi­nan­cial and cul­tural ones, will be reg­is­tered as lim­ited li­a­bil­ity com­pa­nies or joint-equity cor­po­ra­tions in ac­cor­dance with the Com­pany Law, which will ac­cel­er­ate the es­tab­lish­ment of an ef­fec­tive and bal- an­ced cor­po­rate gov­er­nance struc­ture, based on their le­gal per­son sta­tus, as well as a flex­i­ble and ef­fi­cient mar­ke­tized man­age­ment mech­a­nism,” the plan said.

The doc­u­ment pro­vides sup­port­ive poli­cies on reg­is­tra­tion, land us­age and taxes. New com­pa­nies can still be kept solely State-owned and the reg­is­tered cap­i­tal will be eval­u­ated based on au­dited net as­sets. They can be reg­is­tered as joint-equity com­pa­nies with State Coun­cil per­mis­sion, and reg­is­tered cap­i­tal is as­sessed via pro­ce­dures like au­dits and as­set eval­u­a­tions.

By the end of 2016, more than 92 per­cent of sub­sidiaries un­der 101 cen­tral SOEs had been re­struc­tured into mod­ern com­pa­nies. The re­form of the re­main­ing com­pa­nies is ex­pected to in­volve 3,200 sub­sidiaries of 69 cen­tral SOEs, which have to­tal as­sets of 8 trillion yuan ($1.18 trillion).

In the first half of 2017, cen­tral SOEs made $78.66 bil­lion in net profit, an in­crease of 18.6 per­cent com­pared with the same pe­riod last year, ac­cord­ing to the State-owned As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion.

SOE re­form aims to boost ef­fi­ciency and in­crease Sta­te­owned as­sets, said Liang Jun, a re­searcher at the Guang­dong Academy of So­cial Sciences. “But the re­form has been ob­structed by some his­tor­i­cal prob­lems, in­clud­ing hard-tode­fine reg­is­tered cap­i­tal. The plan will clear ob­sta­cles and help el­i­gi­ble SOEs elim­i­nate in­sti­tu­tional bar­ri­ers. The cor­po­rate le­gal per­son sta­tus pro­vides a le­gal foun­da­tion to fur­ther the cam­paign such as ac­qui­si­tions, merg­ers and mixed own­er­ship re­forms,” Liang said.

“Though many SOEs have set up the mod­ern com­pany sys­tem, there’s still room for im­prove­ment,” said Li Jin, chief re­searcher at the China En­ter­prise Re­search In­sti­tute, say­ing some com­pa­nies’ gov­ern­ing boards ex­isted in name only.

The China Gen­eral Nu­clear Power Group, the coun­try’s largest nu­clear op­er­a­tor, wrapped up the re­form last year. Its spokesman Huang Xiaofei said the com­pany wit­nessed a strength­ened mar­ket con­scious­ness and a more flex­i­ble com­pany sys­tem af­ter be­ing re­struc­tured.

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