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Beijing weighs restructuring and SOEs' market share

CCTV.com

03-10-2017 08:21 BJT

Full coverage: 2017 NPC & CPPCC Sessions

(Source: CGTN)

The reform of state-owned enterprises in China is one of the toughest nuts to crack for the government, as the stakes are high for all involved. This year, the government is reflecting on the urge for overhaul in the state asset structure. But are state companies motivated to take bolder steps on reform?

Xiao Yaqing, head of State-owned Assets Supervision and Administration Commission (SASAC), Zhang Xiwu and Huang Danhua, deputy heads of the SASAC, and Peng Huagang, deputy secretary and spokesperson of the SASAC, take questions on reform of state-owned enterprises at a press conference for the fifth session of the 12th National People

Xiao Yaqing, head of State-owned Assets Supervision and Administration Commission (SASAC), Zhang Xiwu and Huang Danhua, deputy heads of the SASAC, and Peng Huagang, deputy secretary and spokesperson of the SASAC, take questions on reform of state-owned enterprises at a press conference for the fifth session of the 12th National People's Congress (NPC) in Beijing, capital of China, March 9, 2017. (Xinhua/Li Xin)

"Restructuring". A keyword dominating the agenda for China's state asset reform. That's the sentiment from the country's state asset manager.

"We want stronger regulation on state assets and control on risks. We will deepen state asset restructuring among centrally run SOEs, especially those in steel, coal, heavy equipment and coal power. It won’t work without restructuring," Xiao Yaqing, head of State-owned Assets Supervision and Administration Commission (SASAC), said.

However, analysts say the merger between state companies has not yet translated into high profitability.

The state assets manager dismissed concerns that restructuring would create new monopoly, but didn’t elaborate on what has been done to prevent such an issue.

Beijing’s confidence in the SOE reform comes from a recent earnings reports.

State-owned companies hauled in a profit of 24.3 billion US dollars, up 29 percent on the year.

On a yearly basis, SOEs posted the fastest profit growth in 4 years.

Another key restructuring plan for SOEs is to welcome more private capital in. But many investors complain that some market barriers remain high. The SASAC says that is due to a series of mismatches in the market.

"Mixed-ownership is not the only way for all SOEs to reform. Some are suitable to do so, some are not. Mixed-ownership needs to benefit all stakeholders. but many SOEs are not ready for it. Many companies and their external investors also cannot agree on corporate governance, asset management strategy and investment returns,"  Xiao Yaqing, head of State-owned Assets Supervision and Administration Commission (SASAC), said.

China wants to strengthen the SOE’s market share and importance. But there is not enough motivation to reform. Many SOEs heavily depend on parent companies on orders.

The overall debt-ratio in the sector is high while liquidity in the market is tight.

Compared to private and foreign firms, SOEs are also slower to adjust and respond to a fast changing business environment.

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