Journalist of China Securities Journal learnt that meeting for persons in charge of central state-owned enterprises (SOEs) will be held in the middle of this month. It will focus on seven aspects to comprehensively deploy the development work related to reform of the state-owned assets and enterprises in 2016, and these seven aspects include deepening reform, improving quality and efficiency, handling “zombie enterprises”, optimizing resource allocation, reinforcing state-owned assets supervision, strengthening monitoring, promoting mass entrepreneurship and innovation. Industrial insiders believed that SOEs will carry out structural reform in 2016, and SOEs reform will also see a substantial progress.
Reform to gain breakthroughs
In recent period, reform of state-owned assets and enterprises is speeded up.
Since Sep. 13, 2015 when top design scheme on SOEs reform was issued to the end of last year, ten supporting schemes have been successively issued, such as guidelines on function definition and classification, opinions for mixed ownership economy. In addition, another nine documents, including opinions on employee shareholding plan related to mixed ownership, will be announced this year. Central and local SOEs speed up the steps to implement the reform measures, positively bring in other state-owned capital or various private capitals to realize the equities’ diversity, and explore a way to carry out employee shareholding plan in mixed ownership enterprises.
Ten central SOEs implemented restructuring in 2015, setting a new high in the latest five years. Especially, four restructurings were carried out in last December, involving eight central SOEs with the assets of nearly 1 trillion yuan. Central SOEs directly under State-owned Assets Supervision and Administration Commission (SASAC) decrease to 106, and their restructuring obviously accelerates.
In terms of key tasks for state-owned assets and SOEs reform this year, related direction gradually becomes clear based on attitude of related SASAC officers in various meetings.
In terms of optimizing resource allocation, Zhang Xiwu, deputy director of SASAC, indicated in the routine meeting about policy information of the State Council Information Office held on Dec. 11, 2015 that we should promote merging and restructuring of central SOEs and industrial sectors, optimize and integrate service industrial resources, reduce repeated investment, and make the industrial produce synergistic effect. Central SOEs can further decrease through merging.
In terms of handling “zombie enterprises”, Zhang indicated that they will handle them with different policies based on their classification, and insist market-oriented reform with enterprises as main subjects. Zhang also mentioned that they propose to speed up various steps to deal with these “zombie enterprises”, such as deepening the reform, reducing staff to improve efficiency, reappraising the fixed assets and circulating funds, restructuring the liabilities, transferring property rights, and shutting down the enterprises for bankrupt. They will promote merging & restructuring, reinforce the management, and clear up the lagged ones.
In terms of improving quality and efficiency, Zhang indicated in the work meeting about operation and performance held by persons in charge of central SOEs that, the overall requirement for performance evaluation work in 2016 and the fifth tenure is to focus on the core goal of reinforcing, optimizing and enlarging central SOEs, further improve performance evaluation system, intensify the strength to guide the central SOEs to improve the quality and efficiency, make every effort to recover the growth of economic benefit in 2016, realize stable growth in the fifth tenure, and make new contribution to constant and sound development of national economy.
In terms of reinforcing state-owned assets supervision, SASAC director Zhang Yi once wrote in the article that we should actively carry out main task of state-owned assets supervision based on capital management, transform the function of state-owned assets supervisor, boost the SOEs to be independent market player, promote reform of corporate system and joint-stock system, improve state-owned capital allocation and operational efficiency, restructure and build investment and operation companies with stated-owned capital, enhance unified supervision on operational state-owned assets, stably absorb state-owned assets of enterprises under the Party, governmental organization and public institutions into unified supervision system on operational state-owned assets, and put qualified ones into state-owned capital investment & operation companies. Supervision should be reinforced to prevent losses of state-owned assets.
“The SOEs reform of this year will gain breakthroughs on five aspects.” Li Jin, vice president of China Enterprise Reform and Development Society, indicated that, firstly, government and enterprises should be separated to make the enterprises become independent market players; secondly, substantial steps will be taken to build investment & operation companies, and merging, acquisition & restructuring will further be speeded up; thirdly, capacity reduction will be a breakthrough point, dealing with “zombie enterprises” will be a priority among priorities, and merging, acquisition, restructuring, clear-up and bankrupt will gain substantial progress; fourthly, reform of monopolized industries will be intensified, especially electricity, oil & gas and etc.; fifthly, many aspects, such as mixed ownership reform and employee shareholding plan, are likely to achieve large breakthroughs.
Investment opportunities to be explored based on five factors
Sealand Securities Co., Ltd. (000750.SZ) indicated that central SOEs are typically large but not powerful, and their resources mostly concentrating in traditional industries have not been utilized effectively, with commonly surplus capacities and inventories. Along with increasing expectation that growth rate of domestic macro economy will decline, part of central SOEs have suffered losses, and a large number of them also face such risk. Therefore, it is imperative to carry out reforms on central SOEs. It is suggested to pay attention to the following aspects when exploring investment and reform path for the central SOEs: 1) groups with sole listing platform should focus on possibility to inject high-class assets into listed companies; 2) groups with several listing platforms should focus on internal resource integration among these listed companies, especially keeping a close eye on companies with frequent reforms in recent period; 3) main businesses of companies will be greatly supported by the policies, including energy conservation and environment protection; 4) some companies belong to groups, which are selected to initially carry out pilot reform on central SOEs, but they have not gained actual reform progress, so these companies generally have strong reform expectation; 5) some companies are likely to be selected on the list for the second wave of pilot reform on central SOEs.
Citic Securities Company Limited (600030.SH) believed that assets securitization ratio of state-owned economy is not high on the whole. Based on strategic deployment for SOEs reform and state-owned economy carried out by the central government, it is necessary to improve such ratio. No matter for SOEs reform or assessment mechanism, the SOEs suffering losses in the sole listing platform with low assets securitization ratio will have larger investment space.
Translated by Jelly Yi
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