Special funds underpin SOEs' mixed-ownership reform

Chinese 100 yuan banknotes are seen in a counting machine while a clerk counts them at a bank in Beijing, March 30, 2016. [Photo/Agencies]

As the third batch of central State-owned enterprises to carry out mixed-ownership reform is likely to undergo process soon, a slew of funds backed by state capital sprang up to support the project across the country, China Securities Journal reported.

Li Jin, chief researcher at the China Enterprise Research Institute, told the Journal that these specific funds are vital to expand capital investment and could best use market forces to inject vigor to the new round of SOE reform.

In August, the China Structural Reform Fund led by State-owned capital joined hands with Industrial and Commercial Bank of China Beijing branch and Beijing Wealth Capital to establish a special fund, which aims to invest in mixed-ownership reform and restructuring of central and local government-controlled enterprises.

A similar fund was set up by Hebei State-Owned Assets Holding & Operation Co Ltd and CCB Trust Co Ltd in May with 50 million yuan ($7.59 million) registered capital, while such funds have also emerged in Shenzhen, Shanghai and Guangzhou.

In addition, a hundred-billion-level special fund is being planned to boost the mixed-ownership reform, according to The Economic Observer. It is reported that the fund would probably be inclined to private capital.

It was made clear at the State Council's executive meeting on Sept 27 that the reform and restructuring of central SOEs welcomes participation of both private and foreign capital. The new round of restructuring will be a key opportunity to boost reform and the institutional innovation of central SOEs.

On Sept 28, Xiao Yaqing, head of the State-owned Assets Supervision and Administration Commission, said at a news conference, "We welcome companies of all ownership types, including foreign companies, to participate in China's SOEs mixed-ownership reform".

Up to now, the last two batches of 19 central SOEs have undergone mixed-ownership reforms, involving areas such as electric power, oil, natural gas, railway, and telecommunications.

One recent example of this reform is China United Network Communications Group Co Ltd, the country's second-largest mobile carrier by subscribers. The firm carried out the mixed-ownership reform scheme in August and received capital from private investors — among them domestic tech titans Tencent Holdings Ltd, Alibaba Group Holding Ltd, Baidu Inc, JD.com Inc and Suning Commerce Group Co Ltd — by selling a 35.2 percent stake.

The reform and restructuring of central SOEs is to boost efficiency and promote supply-side structural reform. Since 2003, the total number of central SOEs has sharply fallen from 196 to 98.