China's mixed ownership reform advances against headwinds

Reform benefits all

"Navinfo and Tencent are highly complementary," said Ren Yuxin, Tencent's chief operating officer, explaining that Navinfo has strong mapping capacity and Tencent has a sea of consumer data collected from a huge user base.

Combining the advantages can enable the two to create new location-based services and enrich Navinfo's in-vehicle navigation system by adding functions like instant messaging and music playing, according to Ren.

The deal is also expected to put Tencent in a favorable position in digital map services against BaiduMap and Alibaba's AutoNavi.

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The SDIC also benefits from diversified ownership. Its contract with private insurance company Taikang helped the SDIC expand insurance market share. Partnering with the corporation, Taikang is expected to be able to raise investment more easily.

"The mixed ownership reform pushes us closer to the market and boosts our vitality and competitiveness," said SDIC board chairman Wang Huisheng.

China has thousands of SOEs and 113 of them are directly administered by the country's central authority. These enterprises are deemed as the backbone of China's economy. But their monopoly in many scopes shuts out smaller market entities and causes low efficiency and poor services.

"The mixed ownership reform is a remedy," said Zhao Linghuan, CEO of investing firm Hony Capital, which has been doing business with SOEs for a decade.

Problems ahead

Despite a number of successful cases, failures have showed that pushing forward mixed ownership is not easy.

A photovoltaic project managed by an SOE in Nnorthwest China's Qinghai province refused to invite in private investment. The project is one of the NDRC's 80 programs.

A senior executive surnamed Xie said, "We have abundant capital and can easily get credit from banks. If the ownership becomes complicated, management will get difficult."

Cai Zebin, general manager of a Nanjing-based private electrical equipment manufacturer, is also hesitant to invest.

"Even if we participate, we have no controlling stakes. Who can safeguard our interests against powerful SOEs?" said Cai.

"To dismiss these worries, China should lay down rules or even make laws to regulate activities during the reform and make sure private investors are treated fairly," said Gao Minghua, an SOE researcher with Beijing Normal University.