Full steam ahead

Man­u­fac­tur­ing sec­tor con­tin­ues expansion in June, sur­vey shows

China Daily (Hong Kong) - - FRONT PAGE - By ZHONG NAN zhong­nan@chi­nadaily.com.cn

The up­com­ing three-year ac­tion plan for State-owned en­ter­prises (2020-22) will strengthen China’s ef­forts to steer the econ­omy to­ward in­no­va­tion and tech­nol­ogy-driven high-qual­ity growth, ex­perts said on Wed­nes­day.

The com­ments came after the 14th meet­ing of the Cen­tral Com­mit­tee for Deep­en­ing Over­all Re­form re­viewed and ap­proved the three-year ac­tion plan for SOE re­form (2020-22) on Tues­day, ac­cord­ing to in­for­ma­tion re­leased by the State-owned As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion of the State Coun­cil.

The next three years will be cru­cial for the coun­try’s SOE re­forms, the meet­ing said, stress­ing ef­forts to op­ti­mize the lay­out and struc­ture of the State-owned econ­omy to make it more com­pet­i­tive, in­no­va­tive, con­trol­lable, in­flu­en­tial, and more re­silient to risks.

Li Jin, chief re­searcher at the China En­ter­prise Re­search In­sti­tute in Bei­jing, said the plan to fur­ther fo­cus on mixed-own­er­ship re­form and re­or­ga­ni­za­tion will im­prove the State cap­i­tal reg­u­la­tions, free SOEs from their so­cial pro­gram obli­ga­tions and re­solve other long-stand­ing is­sues.

Mixed-own­er­ship re­form, a break­through com­po­nent of over­all SOE re­form, has seen con­sid­er­able progress in the past year. More than 1,000 new mixed-own­er­ship en­ter­prises were added and more than 150 bil­lion yuan ($21.23 bil­lion) of so­cial cap­i­tal in­tro­duced via the cap­i­tal mar­ket and other fi­nanc­ing mea­sures, ac­cord­ing to data from SASAC.

In ad­di­tion to at­tract­ing so­cial in­vestors from the do­mes­tic mar­ket, Ger­man auto giant Volk­swa­gen AG spent 1 bil­lion eu­ros ($1.12 bil­lion) in late May to ac­quire a 50-per­cent stake in a sub­sidiary of An­hui Jianghuai Au­to­mo­bile Group Corp, or JAC, and will in­crease its stake in the joint ven­ture JAC Volk­swa­gen to 75 per­cent from 50 per­cent soon, mark­ing the first case of for­eign cap­i­tal be­ing in­volved in the mixed-own­er­ship re­form of a State-owned au­tomaker in China.

The deal, which is ex­pected to be con­cluded within this year, will help Volk­swa­gen gain man­age­ment con­trol of JAC Volk­swa­gen, pav­ing the way for more elec­tric car mod­els and in­fras­truc­ture.

“The re­form will not only cre­ate more com­mer­cial vi­tal­ity and ex­pand over­seas sales chan­nels for SOEs, but also in­tro­duce a mar­ke­to­ri­ented re­mu­ner­a­tion sys­tem to bet­ter re­ward out­stand­ing per­for­mance and in­cen­tivize in­no­va­tion,” said Lin Wei, a Global Strat­egy Group part­ner at KPMG China.

The in­volved par­ties should also con­sider, among other com­po­nents, own­er­ship struc­ture, dig­i­tal and tech­nol­ogy adop­tion and how to cre­ate share­holder value, he said.

He ex­pects the plan­ning process of the 14th Five-Year Plan (2021-25) pe­riod to of­fer a great op­por­tu­nity for SOEs to think strate­gi­cally and proac­tively about how to steer their own trans­for­ma­tion and build key ini­tia­tives into their plans.

Al­though the COVID-19 pan­demic, geopo­lit­i­cal un­cer­tain­ties and trade ten­sions will un­doubt­edly bring many new com­plex­i­ties and con­cerns, they will not be bar­ri­ers that slow down the SOE re­forms; rather they well be the cat­a­lysts for re­form, said Liang Jun, president of the Guang­dong As­so­ci­a­tion of State-owned Cap­i­tal in Guangzhou.

China’s SOEs will fo­cus more on their main busi­nesses, es­tab­lish sound mar­ket-ori­ented op­er­at­ing mech­a­nisms and fur­ther cut their monopoly roles to bet­ter adapt to the chang­ing mar­ket en­vi­ron­ment, he said.

To bet­ter com­pete with global ri­vals, Liang said the mixed-own­er­ship re­form in sec­tors such as in­for­ma­tion tech­nol­ogy, new en­ergy and high-end equip­ment man­u­fac­tur­ing has no­tably surged since 2019, in­di­cat­ing the coun­try’s pol­icy re­quire­ments for op­ti­miz­ing the Sta­te­owned

cap­i­tal lay­out and re­sources.

Thanks to the coun­try’s eco­nomic re­cov­ery and a num­ber of big-ticket in­vest­ment projects to be con­ducted in the sec­ond quar­ter of this year, the prof­its of China’s SOEs rose by 251.1 per­cent in May on a monthly ba­sis, the Min­istry of Finance said ear­lier this week.

In the first five months, the gross rev­enue of SOEs reached 21.84 tril­lion yuan, down by 7.7 per­cent on a yearly ba­sis, com­pared with the 9.2per­cent drop dur­ing the Jan­uary-toApril pe­riod, the of­fi­cial data showed.

SHAO RUI / XIN­HUA

Tech­ni­cians work at a ma­chine tool mak­ing com­pany in Baoji, Shaanxi prov­ince.

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