Scientific research institutes are honored as the “diamond mine” of military groups. The State Administration of Science, Technology and Industry for National Defense (SASTIND) and relevant departments have discussed with various military groups about the reform of scientific research institutes. The Plan on the Classification of Military Scientific Research Institutes and the Plan on the Implementation of Classification and Reform of Military Scientific Research Institutes then take shape.
The asset securitization rate of various military groups will be increased once the ice-breaking detailed rules on the reform of scientific research institutes are determined. For example, the senior management of Aviation Industry Corporation of China (AVIC) once disclosed that AVIC would soon reach its targeted asset securitization rate of 80 percent if policies on the military scientific research institutes reform can be put into practice.
Military reform drives restructuring of military industry
The mulling on the “reform on the classification of military scientific research institutes” dates back to 2013. Industrial participants expect that relevant policies will be unveiled as the military reform advances.
The journalist on Jan. 14 learnt that some of the plans for the reform on the classification of military scientific research institutes have been formulated and submitted for approval, and they will be released soon. It means that the restructuring of military industry, echoing with the military reform, will also take an important step forward in 2016.
The capital market pays close attentions to the military scientific research institutes which are regarded as top quality assets under military groups. Thanks to advanced technologies and numerous talents, military scientific research institutes can operate without heavy asset. Information shows that the 28 military scientific research institutes under China Shipbuilding Industry Corporation (CSIC) contribute over 30 percent of the group’s profit.
However, as a tough part of the whole military reform, the reform on military scientific research institutes involves problems including personnel reassignment, income distribution, social security, fiscal levy and confidentiality, calls for joint research from multiple parties and should be arranged within the framework of the whole military reform. That’s why it takes so long to come.
Latest progress shows that propelled by the drastic military reform, the military industry reform will also take a big step in 2016.
The journalist learnt from the SASTIND that actively advancing the reform on the classification of military scientific research institutes has been prioritized as one of the key tasks in 2016. In addition, the SASTIND, together with departments including the State Commission Office for Public Sector Reform and the Ministry of Finance, has discussed the classification reform with various military groups. The Plan on the Classification of Military Scientific Research Institutes and the Plan on the Implementation of Classification and Reform of Military Scientific Research Institutes take shape.
In addition, the SASTIND also drafted and submitted the Supporting Policies on Advancing the Reform and Transformation of Military Scientific Research Institutes into Enterprises through Classification with 31 policies formulated centering on Party construction, personnel reassignment, income distribution, social security, fiscal levy and confidentiality.
Multiple parties pool efforts to make military industry stronger
Besides propelling the reform on the classification of military scientific research institutes, 2016, as a critical year for deepening reform on the science and technology industry of national defense, will see the formulation, release and launch of the “thirteenth five-year plan” for the industry, the great push and special action plans on advancing military-civil integration, and many other big moves. All these will fuel the efforts to sharpen the core competitiveness of China’s military industry.
An analyst remarked that “the progress of the reform on military scientific research institutes, as the key of the new round of military system reform, will directly impact the course of the market-oriented reform of military system. The asset securitization rate of various military groups will be increased once the ice-breaking detailed rules on the reform of scientific research institutes are determined. In the meantime, relevant listed companies will see revaluation.”
Military enterprises show unexpected positive attitude towards the “reform on the classification of military scientific research institutes”.
Yang Xiaoying, secretary of the board of China Shipbuilding Industry Company Limited (601989.SH), told the journalist last year that “China Shipbuilding Industry has officially completed the securitization of core assets in 2014. Advancing the reform on military scientific research institutes will be prioritized in the following time and four technology holding companies will act as the carrier for the listing of these institutes in the future.”
The senior management of AVIC also once disclosed that AVIC would soon reach its asset securitization rate target of 80 percent if the policies on scientific research institutes reform can be put into practice.
The capital market’s interest in the military sector also brings positive effect. Take securities analysts as an example, several senior analysts surveyed by the journalist expect rosy performance of military sector in spite of the plunging A shares.
Feng Fuzhang, a military industry analyst with China Securities Co., Ltd., indicated in a research report on Jan. 11 that “the plunge of the military sector provides good investment opportunity”. Seen from the historical investment cycle of the military sector, the military shares will be driven by factors including policies, market and events in January, thus investment opportunities have emerged.
Besides various policies learnt by the journalist, Feng Fuzhang also believes that more bullish policies will be offered in the future. He added that “the supporting policies for military-civil integration might be released in January, the budget for national defense will be unveiled in March, the policies for the reform on military research institutes might see substantial progress in mid-2016 and a new engine company will be established. All these news will boost the military sector.”
Translated by Jennifer Lu
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