Holding firm for SOEs on the way

The mainland would soon introduce a Temasek Holdings-style state assets management firm to improve efficiency in the country's biggest state-owned enterprises (SOEs), Li Rongrong said yesterday.

Mr Li (right), who heads the State Assets Supervision and Administration Commission (Sasac), also promised to continue to reduce the number of SOEs controlled by Beijing.

'We have been working step by step towards [setting up a management firm] since 2005,' he said on Sasac's website yesterday. 'Now I think we have almost met all the conditions. We have experience with the new model on a small scale in the past two or three years, and it turned out quite successful.'

The new format would reposition the state as an ordinary controlling shareholder of the 138 Sasac-controlled SOEs. The proposed state assets management firm is also expected to make domestic equity investments.

Liu Yuanchun, a professor with Renmin University of China, said: 'The state assets management company is a good concept, but it's hard to say whether it could eliminate the deep-rooted culture of state interference in SOE operations.'

The SOE sector has been an underachieving part of the world's third largest economy. That was reflected in the 2.4 per cent profit growth at privately held industrial companies in the first five months compared with a 41.5 per cent decline in SOEs' profit, according to a survey by the National Bureau of Statistics.

The Sasac-controlled firms, some of which enjoyed de facto monopolies, saw their profits fall more than 20 per cent last year and by one third in the first two months of this year.

The lacklustre performance has triggered public resentment over the compensation of SOE executives.

Though promising a new evaluation mechanism to determine the pay of top SOE managers, Mr Li suggested that the critics be realistic.

'We have to compete for talent with multinationals and private companies,' he said.

Mr Li said Sasac would reduce the number of these companies, now sitting on total assets of 18 trillion yuan (HK$20.41 trillion), to fewer than 100.