Citic's shift to Hong Kong seen as role model for other mainland SOEs
Restructuring seen as part of push to overhaul state-owned enterprises and boost Beijing's influence in an increasingly restive Hong Kong
In 1979, as paramount leader Deng Xiaoping reopened China's depleted economy, he invited some old industrialists who had survived the revolution for a lamb hot pot lunch in a cigarette smoke-shrouded room.
Their brainstorming session gave rise to Citic Group, the pillar of a revitalisation plan to lure foreign investment and blaze communist China's capitalist path. Citic grew into China's biggest diversified company with total assets of US$572 billion and interests in everything from real estate to banking to golf.
Now, the government is turning again to Citic, this time to lure more private investment to inefficient state-owned enterprises and to aid its global ambitions by acquiring companies overseas. Politically, in a bid to boost its impact in the city, the mainland is moving the majority of Citic's assets from Beijing to Hong Kong. Citic is ultimately controlled by the State Council and Communist Party.
"Citic's restructuring is part of the Chinese leadership's new push to overhaul the governance and financial performance of state-owned enterprises, which have been terrible," said Andrew Batson, Beijing-based China research director at Gavekal Dragonomics, an economic research firm.
Beijing wants to step up influence ... as Hong Kong is ... seen as disobedient
The shift comes as tension is simmering over China's role in Hong Kong's political system, and demonstrations calling for more democracy are a weekly fixture in Hong Kong's streets. China is losing popularity with investors as stocks continue to fall on fears of continued economic slowdown and citizens who chafe at an influx of mainlanders blamed for everything from rising property prices to crowded subways, shops and even maternity wards.