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China publishes guidelines on SOE reform

An investment company is to manage China's state capital and restructure state owned enterprises (SOEs), according to Chinese state media.06 Nov 2015

It is not yet clear whether a new investment company will be set up to perform these tasks or whether existing state equities and budgets will transfer to an existing qualified wholly state-owned enterprise, news agency Xinhua said in reporting that China's state council has published guidelines on reforming the management of the country's SOEs., The investment company will aim to increase the value of capital invested in the SOEs, reduce outdated and excess capacity in the SOEs and dispose of inefficient assets, Xinhua said.

Under the new guidance, China's state capital will no longer be invested in some SOEs, while others will be restructured or upgraded, according to Xinhua's report. The released capital will be invested in major infrastructure, "forward looking and strategic" industries, in the industrial supply chain, and in "firms with string competitiveness", it said.

The Chinese government will also transfer some of the released equity into social security funds to help make up a shortfall in pension funds, Xinhua said.

In September the Chinese government released guidelines on SOE ownership and salaries. SOEs would be divided into two categories, for-profit entities and those dedicated to public welfare, it said at the time.

Earlier this year the South China Morning Post reported that the SOE reforms were expected to create 'Temasek-style' businesses, named after an investment company owned by the Singaporean government, which operates as a sovereign wealth fund.

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