In recent weeks, some of China’s top conglomerates have announced spin-offs and restructuring plans, local authorities have begun experimenting with new management structures, and political sources say a group focused on state enterprises is playing a prominent role in President Xi Jinping’s economic brain trust.

Last week, Citic Group, China’s flagship conglomerate, detailed plans to inject its main operating business into the firm’s Hong Kong-listed subsidiary Citic Pacific in a US$36.5 billion deal that should improve the management and outside scrutiny of the group.

During the last reform push, the government sold off or closed thousands of firms, laying off 30 million workers and cutting the number of state firms to about 110,000 from 260,000. That boosted efficiency, opened room for private businesses and cemented China’s position as the world’s factory floor.

This time, however, there is no one-size-fits-all solution.

“The situation is now different,” Li Yining, a Peking University economist and a leading advocate of privatisation, told reporters last month. He said resistance from interest groups and institutional inertia were the hardest nuts to crack.

In the five years since the global financial crisis, state firms have grown bigger and more dominant but also more indebted and plagued by overcapacity.

China’s 113 central-government-controlled conglomerates alone borrowed 18 trillion yuan (HK$22.6 trillion) between 2008 and last year, raising their debt-to-equity ratio 40 percentage points to 192 per cent.

That is on top of 32 trillion yuan borrowed by 110,000 firms owned by local governments, which raised total state enterprise debt to about half of China’s gross domestic product.

“The financial leverage at SOEs is too high,” said Steven Sun, head of China equity strategy at HSBC Global Research.

Sun calculates China’s state-owned firms have spent all the cash flow generated from business operations in the past five years on capacity expansion, double the ratio for non-financial S&P 500 companies.

“They need to scale back, and one of the best ways to do that is selling stakes to strategic investors and private capital,” he said.

Spearheading the government’s restructuring efforts is one of six teams named by Xi as part of his comprehensive reform office. Membership of the group hasn’t been made public, but analysts say Vice-Premier Zhang Gaoli may be in charge.

The provinces of Guangdong, Anhui, Hunan, Guizhou and Shaanxi, along with the municipalities of Shanghai, Chongqing and Tianjin and the city of Zhuhai, have announced privatisation plans that are likely to vary depending on firms’ role and market position.

In Guangdong, where state administrators oversee over 4 trillion yuan in assets, provincial leaders have announced they will diversify ownership in 13 sectors, including transportation, electricity, health care and mining. The goal is to bring in 100 billion yuan in private investment by 2020.

Guangdong, Hunan and Guizhou are also allowing, for the first time, senior executives to own shares in firms they manage.

Local governments are experimenting with using asset management companies to act like value-driven institutional shareholders rather than an extension of bureaucracy. In Chongqing, the government aims to transform two state firms into investment holding companies, and Shanghai is set to transfer more state-owned assets to three asset management companies the city has set up since 2000.

Besides Citic, China Petroleum and Chemical, or Sinopec, announced a planned spin-off of part of its marketing arm that could raise up to US$20 billion.

The pace of the overhaul will largely depend on Xi’s success in firming his grip on power and overcoming opposition within political and economic elites.