Journalist recently found that, as a significant part of “1+N” document for state-owned enterprises (SOEs) reform, the State-owned Assets Supervision and Administration Commission (SASAC) is now speeding up to formulate Guidelines to Promote Structural Adjustment and Restructuring of the Central State-owned Enterprises, likely to issue soon. Based on this, next step is to accelerate the implementation of merging & restructuring pilot of the central SOEs, and promote them to explore the effective pattern for their restructuring & integration through the pilots. Industrial insiders expect that the SOEs’ restructuring will step into an active period in next three years, with highest expectation for that in five industries, such as nuclear power, aviation, shipping, military industry and railway.
“It should promote merging & restructuring of the SOEs, once the condition matures based on market-oriented concept, so that problems of state-owned capital will be solved, such as unreasonable deployment structure, low efficient resource allocation and homogenization development,” the SASAC officer told the journalist. Next step is to constantly accelerate the pace for SOEs reform, intensify the merging & restructuring based on groups, push the powerful ones’ integration, promote the professional restructuring, and further reinforce the integration of homogenized businesses and sub-industries based on industrial magnates.
The said officer also mentioned that China will explore the path and detailed mode for the central SOEs’ restructuring & integration through merging & restructuring reform pilots, including how to implement the business integration after restructuring, remove the homogenized competition, effectively improve the quality & efficiency. China will conclude experience about how to carry out the integration of institutions, management, market and culture, so as to substantially play a role for synergistic effect, realize “1+1>2”, explore the effective path for professionalized restructuring, and reduce the repeated investment and homogenized development. At the meantime, China will also explore an effective way for resource integration inside the SOEs.
It found that the SOEs reform has already possessed a speed-up trend now. Since the middle of May, the central government intensively has deployed the SOEs reform, with clear tasks and timetables for strengthening power and reducing zombie enterprises. Meanwhile, many central SOEs frequently reappointed the senior management from May, like China Southern Power Grid, Xinxing Cathay International Group, China Minmetals Corporation, China First Heavy Industries (601106.SH), and China Grain Reserves Corporation. Additionally, China Minmetals and China Metallurgical Corporation held the restructuring conference on June 2, which is a substantial step of these two central SOEs ranking in Fortune Global 500 for restructuring and integration after the SASAC of the State Council officially announced a strategic restructuring. Li Pumin, secretary general of the National Development and Reform Commission (NDRC), on June 14 indicated in the press conference that moves including pilots for mixed ownership reform are being pushed.
It is worthy to notice that many central SOEs have taken measures since last year; next move of their integration based on different classifications will be the key point of the SOEs reform; and a wave of market-oriented restructuring focusing on the SOEs reform start to initiate. In 2015, the SASAC and related authorities finished six pair of restructuring among 12 SOEs one by one, including China South Railway and China CNR Corporation Limited, State Nuclear Power Technology Company and State Power Investment Corporation, Nam Kwong (Group) Company Limited and Zhuhai Zhen Rong Company, China COSCO Shipping Corporation Limited and China Shipping (Group) Company, China Minmetals and China Metallurgical, China Merchants Group and SINOTRANS&CSC Holdings Co., Ltd. The authorities also organized three telecommunication enterprises to establish China Tower Co., Ltd. in 2015. Many signs show that new round of strategic deployment becomes clear, and the central SOEs has seen the integration peak.
“The SOEs restructuring is expected to step into active period in next three years, and an increasing number of enterprises will be weeded out; various types of integration will speed up, such as acquiring shareholdings, holding right, merging & acquisition, and asset sales through property right market,” said an insider. Based on many insiders, the full implementation of the SOEs reform will raise the evaluation of SOEs listed in the A-share market. Five industries including nuclear power, aviation, shipping, military industry and railway gain the highest restructuring expectation.
Li Jin, chief researcher of China Enterprise Research Institute, told the journalist that, along with the implementation of ten reform pilots for the SOEs reform, 2016 will certainly be the year of merging and restructuring. Currently, the state-owned capital is divided into two types of public welfare and commerce, but the large scale of market-oriented merging and restructuring in this round will firstly focus on commercial SOEs, especially the ones full of competition. Resource factors will further concentrate on big enterprises and companies.
Li said: “While reinforcing the main businesses, this round of merging and restructuring will be more market-oriented and open, avoiding administrative appropriation and focusing on capital market.” He also frankly indicated that, along with state-owned capital investment, operational companies’ establishment, and the proposal of “three waves”, merging and restructuring will see a new situation. It is a significant way for the SOEs reform, but also linked with structural adjustment and mode transformation. In a certain period, merging and restructuring will become the core hub in the SOEs reform development. Merging & restructuring cases in the pattern of powerful ones’ alliance, separation & restructuring, mixed ownership, internal restructuring and so on will constantly emerge. In next step, the central SOEs in the competitive industries, with highly homogenized products, and struggling in fierce international competition are likely to create new core competitiveness through merging and restructuring.
Translated by Jelly
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