Liaon­ing sells shares in seven SOEs whose to­tal mar­ket value tops $60 bil­lion

China Daily (USA) - - BUSINESS - By LIU CE in Shenyang li­uce@chi­nadaily.com.cn

Se­nior of­fi­cials from north­east­China’s Liaon­ing province mar­keted shares of seven State-owned en­ter­prises to pri­vate in­vestors on Mon­day in or­der to bal­ance the province’s frag­ile social se­cu­rity ac­counts and im­prove the com­pa­nies’ per­for­mance.

Pri­vate in­vestors will be al­lowed to buy up to 20 per­cent of each of the seven SOEs. The com­pa­nies are Liaon­ing Trans­porta­tion Con­struc­tion In­vest­ment Group Co Ltd, Liaon­ing Wa­ter Re­sources Man­age­ment Group, Liaon­ing En­ergy In­vest­ment (Group) Co Ltd, Liaon­ing Dalian Fish­ery Group, Fushun Min­ing Group Co Ltd, Shenyang Coal Trade Group Co Ltd, and Tiefa Coal In­dus­try Co Ltd, ac­cord­ing to ShenyangUnited As­sets and Eq­uity Ex­change.

Two of these have listed com­pa­nies. The mar­ket value of the seven 401.07 bil­lion bil­lion).

Chen Qi­ufa, gov­er­nor of the province, re­quired the Liaon­ing State-owned As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion to or­ga­nize sales “to ac­cel­er­ate di­ver­sity of SOE eq­uity, and solve the prob­lem of ‘a dom­i­nance’ of SOE shares” in an early meet­ing about SOE re­form.

As the so-called “last base of China’s planned econ­omy”, com­pa­nies is yuan ($60.04 SOEs of the cen­tral and lo­cal gov­ern­ments sta­tioned in the province ac­counted for more than 30 per­cent of the GDP, com­pared to the na­tional av­er­age of 23 per­cent.

“Two key pur­poses of the deal are to ac­cel­er­ate SOE re­form and the sup­ple­ment social se­cu­rity funds,” said Zhou Rongqiang, vice direc­tor of the Liaon­ing State-owned As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion.

Due to an ag­ing pop­u­la­tion, Liaon­ing had a de­pen­dency ra­tio of 1.79 last year, al­most dou­ble that of na­tion’s av­er­age. Com­bined­with a slug­gish econ­omy, this put Liaon­ing’s social se­cu­rity fund in a rather frag­ile sit­u­a­tion. And, it may be­come worse in the com­ing five years, as the fund­ing gap will amount to 254.6 bil­lion yuan.

The north­east­ern province’s GDP for the first half of the year dropped 1.3 per­cent, the only Chi­nese province that sawneg­a­tive growth in­GDPin that pe­riod, ac­cord­ing to lo­cal gov­ern­ment sta­tis­tics. Its in­dus­trial out­put value plunged 7.7 per­cent dur­ing that pe­riod, while the na­tional av­er­age grew 6 per­cent, ac­cord­ing to the Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy.

In fact, the pro­posal has led to hot de­bates since its launch late Au­gust.

An ex­pert who de­clines to be named says that although sell­ing shares in SOEs is a rea­son­able so­lu­tion for the cur­rent dif­fi­cul­ties, it will also will have long term ef­fects on the econ­omy. He sug­gests the gov­ern­ment should have a sub­stan­tial dis­cus­sion on how to pre­serve and raise val­ues, rather than sell­ing shares.

Zhang Min, a Shenyang born in­vest­ment man­ager, told China Daily: “I don’t care how much they sell. I’m more con­cerned about what kind of the as­sets they hold and about the man­age­ment team.”

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