Jilin Grain gets $1.5 bil­lion in bid to re­struc­ture

China Daily (USA) - - BUSINESS - By ZHONGNANin Bei­jing and LIU MINGTAI in Changchun Con­tact the writ­ers at zhong­nan@ chi­nadaily.com.cn and li­um­ing­tai@ chi­nadaily.com.cn

State-owned Jilin Grain Group Co Ltd, the largest grain trader in north­east­ern China by sales rev­enue, will use 10 bil­lion yuan ($1.5 bil­lion) of new in­vest­ment to add new types of busi­nesses this year, in­clud­ing agri­cul­tural in­surance, ma­chin­ery man­u­fac­tur­ing and pes­ti­cides.

The com­pany is con­fronting fi­nan­cial dif­fi­cul­ties caused by a ma­ture busi­ness model and lim­ited ca­pa­bil­ity in ser­vices.

The in­vest­ment will be raised by Hubei Changjiang In­dus­try In­vest­ment Group Co for Jilin Grain.

Es­tab­lished in 2010, Wuhan-basedHubeiChangjiang is the big­gest fi­nan­cial plat­form in Hubei prov­ince and man­ages a fund of 200 bil­lion yuan. The com­pany plans to raise an­other 10 bil­lion yuan in the sec­ond phase to fur­ther re­struc­ture Jilin Grain over the next three years.

Dong Zhifa, deputy gen­eral man­ager of Hubei Changjiang, said the money will be spent on adding new busi­nesses to Jilin Grain and cut­ting units that are in­ca­pable of mak­ing profit or are in sec­tors that have pro­duc­tion over­ca­pac­ity. Merg­ers and ac­qui­si­tions will be the main ap­proach to achieve these goals.

The ini­tial in­vest­ment amount for this move was 6 bil­lion yuan. Hubei Changjiang later in­creased the fund to 10 bil­lion yuan to im­prove Jilin Grain’s earn­ing abil­ity and busi­ness struc­ture.

Jilin Grain has more than 20 sub­sidiaries and 3,000 em­ploy­ees. Its an­nual sales reached 10 bil­lion yuan in 2015.

“We will adopt more flex­i­ble models to op­ti­mize Jilin Grain’s as­set struc­ture and avoid all neg­a­tive out­comes brought about by the rigid man­age­ment mech­a­nism of the State-owned en­ter­prise,” said Dong. Jilin Grain will no longer be a com­pany that fo­cuses only on the grain trad­ing and pro­cess­ing busi­nesses — it will build an in­dus­try chain to ex­pand busi­ness into other re­lated sec­tors such as agri­cul­tural ma­chin­ery, pes­ti­cide and other high-end agri­cul­tural tech­nol­ogy, he said.

Based on its core ca­pa­bil­i­ties of grain plant­ing and agri­cul­tural prod­uct pro­cess­ing, Jilin Grain will add e-com­merce, grain trad­ing and lo­gis­tics, fi­nan­cial ser­vices such as agri­cul­tural in­sur­ance­andguar­an­tees, bank­ing ser­vices, fu­tures trad­ing and fi­nan­cial leas­ing.

“As the gov­ern­ment is wel­com­ing pri­vate and mixed in­vestors par­tic­i­pa­tion in SOEs’ stock­hold­ing and busi­ness re­forms, the mixed-own­er­ship partnership, trans­par­ent man­age­ment and fair com­pe­ti­tion can be pos­si­ble,” said Ding Lixin, a re­searcher at the Chi­nese Academy of Agri­cul­tural Sci­ences in Bei­jing.

Ding said this will give con­sumers freer choice and bet­ter ser­vices.

An­a­lysts said that such moves to re­form and be­come more ef­fi­cient will con­tinue, with the cen­tral gov­ern­ment push­ing fur­ther ahead with its ef­forts to re­struc­ture the SOEs this year.

“SOEs will have to go through a deep­en­ing re­form be­cause of tougher global com­pe­ti­tion and the trans­for­ma­tion of the Chi­nese econ­omy,” said Li Yin­ing, a pro­fes­sor at Pek­ingUniver­sity.

fund un­der man­age­ment of Hubei Changjiang In­dus­try In­vest­ment Group Co

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