Forget privatisation, Xi has other big plans for bloated state firms
More private investment is designed to improve their efficiency, but critics say the measures will prop up the huge, bloated and protected firms, stifling competition
China’s government is speeding up a massive ownership change among its largest state-owned enterprises designed to make them richer, bigger and stronger, a process that may reshape the future landscape of the Chinese economy by cultivating a group of influential “national champions”.
The government is encouraging state financing institutions and the country’s private technology giants to invest in weak state enterprises grappling with debt and inefficiency under its “mixed ownership reform”.
The state parent of China Unicom, the weakest of the country’s three telecom operators in profitability, sold a combined 35.2 per cent equity stake to more than a dozen investors as part of a 78 billion yuan (US$11.9 billion) deal. Among the new investors are Tencent Holdings, JD.com, Baidu and Alibaba Group, which owns the South China Morning Post.
China Railway Corp, with outstanding debt of more than US$700 billion, says it wants to undergo similar mixed ownership reform and it has sent “invitations” to a number of potential investors, including FAW Group, the country’s state-owned car maker. Private courier SF Express said it would “seriously study and proactively participate” in the railway firm reforms.
The Chinese government is also asking the big “dinosaur” state enterprises to swallow up the smaller ones. Poly Group, a defence and property conglomerate with US$95.7 billion in assets, took over the smaller Sinolight Corp and China National Arts & Crafts Group last month.
The country’s biggest coal miner Shenhua Group was also told to merge with power generator China Guodian to form the world’s biggest energy juggernaut sitting on US$270 billion worth of assets.