China’s state-owned enterprise reform: Shenzhen tries to lure loyal party cadres into oversight roles
- New policy is in line with Beijing’s push to consolidate state control in critical and strategic sectors of the national economy
- Officials in new roles will not be allowed to obtain additional salaries, bonuses or allowances
In an effort to fill Shenzhen’s state-owned enterprises (SOEs) with loyal and capable Communist Party cadres, authorities in the southern tech hub are encouraging local government officials and existing executives of state institutions to take up additional responsibilities in oversight roles as corporate board members.
The new policy has been outlined in drafted regulations for state-owned assets of enterprises, and it is currently open to public feedback.
However, some economists say that a lack of adequate SOE reform is having a negative effect on the nation’s job market, and questions remain about the efficiency of China’s state sector.
In March, Yu Gang, chief of the Shenzhen municipal government’s State-owned Assets Supervision and Administration Commission (SASAC), was quoted by local media as saying, “All along, Shenzhen’s private enterprises have been very strong … Shenzhen’s state-owned enterprises are also very good.”
But now, given the extra attention that Shenzhen is receiving, Yu said the city’s state-owned sector is no longer in a position where it can maintain a low profile. Some of that attention, he explained, comes as several leading enterprises are seeing an influx in state-owned investment.
While the new policy also aims to increase the staffing levels at SOEs, it warned that officials in the new oversight roles will not be allowed to obtain additional benefits, such as salaries, bonuses and allowances, nor use their public positions to seek improper benefits for the enterprises they work for. Through their new board positions, they will also serve as “shareholder representatives”.
The policy changes also encourage Shenzhen’s SOEs to focus on investing in utility infrastructure, finance and strategic emerging sectors while concentrating on industries that can drive or influence other industries.
Local SOEs are also being instructed to gradually sell off poorly performing assets, or at least to stop further investment in them.
The total asset value of Shenzhen’s SOEs rose 12.3 per cent in 2020, to about 4.1 trillion yuan (US$632 billion), according to SASAC statistics. Additionally, 77.8 per cent of the city’s state-owned capital was tied up in infrastructure, public utilities, finance and strategic industries.
State-owned Shenzhen Metro Group also bought a 15 per cent holding in China’s No 2 homebuilder, China Vanke, and became its largest shareholder.
In March, two SOE investment platforms – Shenzhen International Holdings (Shenzhen International) and Kunpeng Capital under the Shenzhen Municipal Government – jointly purchased a 23 per cent stake in Suning.com, one of China’s leading retailers. The deal was valued at about 15 billion yuan. Last year, Suning.com ranked 324th on the Fortune Global 500 list.
Shenzhen Investment Holdings (SIH), under Shenzhen’s SASAC, is also the second-largest shareholder of China Ping An Insurance, one of the nation’s largest financial services and insurance brokers. Shenzhen Investment Holding Corp, which is indirectly owned by the Shenzhen government, holds majority ownership in SIH.