MNI: China Speeds Up Mixed-Ownership Reform of SOEs

--31 SOEs Included In 3rd Round Of Reform Drive

     BEIJING (MNI) - China's National Development and Reform Commission on

Wednesday signaled that it is speeding up reform of the state-owned enterprise

sector, confirming that 31 SOEs are to be included in the third round of the

mixed-ownership reform program for the sector.

     The total of 31 SOEs involved in the third stage is an expansion of the

nine that were involved in the first stage and the 10 that were involved in the

second.

     The NDRC announcement followed a recent wave of vows by various government

officials that SOE reform would be speeded up. At the 19th Communist Party

Congress in October, President Xi Jinping stressed the importance of SOE reform

and transforming the enterprises into mixed-ownership entities in order to

nurture "top-class international companies."

     On Tuesday, the State-owned Assets Supervision and Administration

Commission of the State Council published an analysis by SASAC director Xiao

Yaqing of Xi's report. In it, Xiao stressed the significance of SOE reform and

pledged to advance mixed-ownership reform of SOEs in "key fields," improve

initial public offerings of SOEs, support private investment in SOEs through

various means, and encourage private investors to participate in the

restructuring and reorganization of SOEs.

     As of the end of 2016, total assets of SOEs had reached CNY154.9 trillion,

but their efficiency had deteriorated and their profit rates were low, due in

large part to poor corporate governance and low workforce productivity. In

response, the Chinese government has been working to reform the shareholding

structures of SOEs and has asked them to spin off non-core assets and

businesses.

     This year has seen SOE reform increasingly expanded to the capital market.

The state-owned telecommunications operator China Unicom, for example, in

October finalized a deal to sell off a 35% share stake in its Shanghai unit to

private investors including Baidu, Tencent, Alibaba and JD.com.

     Local governments have also stepped up reforms of local SOEs, with Beijing

earlier this month issuing a document on deepening reform of local SOEs that

provide "cultural products" such as films and media content. Beijing also set a

goal of having at least one subsidiary company under every such SOE listed on

the stock market.

     Shenzhen city also rolled out a scheme at the end of October to accomplish

mixed-ownership reform of local SOEs in "competitive sectors" by 2019.

     As shares of around 50 local SOEs are suspended on the Shanghai and

Shenzhen stock market because of reorganizations of their important assets or

"other important events," more SOE reform measures are expected, including from

the Central Economic Work Conference, an annual gathering that occurs at the end

of the year.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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