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President Xi Jinping tours a free-trade zone in Shenzhen in 2018. China’s southern tech hub has been given special responsibilities as a pioneer in state-owned enterprise reform. Photo: Xinhua

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.

This move comes as the influence of SOEs is increasing in the economy, in line with the central government giving Shenzhen special responsibilities as a pioneer in SOE reform.
Beijing is striving to consolidate state control in critical and strategic sectors of the national economy, and President Xi Jinping in November called for SOEs to be “ stronger and bigger”. The central government also found that state-led monopolies were most effective in complying with government demands during the coronavirus crisis.

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 governments in China have been trying to lure private capital, and even foreign funds, into some state firms through what is known as “mixed-ownership reform”, which also involves government-led merges and the consolidation of various state-run companies.

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.

One of the high-profile developments in Shenzhen came late last year as a consortium of more than 30 agents and dealers – named Shenzhen Zhixin New Information Technology – was formed to buy out Huawei’s former budget smartphone brand known as Honor, which Huawei sold due to the impact of US tech sanctions on the company.

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, one of China’s leading retailers. The deal was valued at about 15 billion yuan. Last year, 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.

This article appeared in the South China Morning Post print edition as: Shenzhen seeks party cadres for state firms