Restructuring SOEs May Have Foreigners Attend

It is said that the foreigners may be given the opportunity to take part in the restructuring of the state-owned enterprises (SOEs).

The pattern of restructuring SOEs has seen tiny changes after Wang Yong took charge of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) three months ago.

The previous quantified goal of restructuring 100 SOEs by the end of this year has been changed. The new principle is to conduct the restructurings based on the working quality and performance.

The original pattern of the central SOEs featuring “group company + listed company” is also undergoing changes. According to Shao Ning, deputy director of the SASAC, the organization is to erase the “group companies”. “We will gradually throw away the loads and put an end to the group companies with the listed companies engaged in major business left. The operation and management will be done in complete accordance with the marketing rules.”

Changed Deadline

According to the original schedule of restructuring SOEs, the number of central SOEs will be reduced to 100 in this year.

But a source close to the SASAC said that there was not sufficient time to reduce the number of central SOEs from 120 to 100 in this year.

According to Shao Ning, the SASAC always places the effect of restructuring at the first place. If the restructuring only puts number into consideration, the effect can not be guaranteed.

“If the progress of restructuring is based on the effect, reducing the number of central SOEs to 100 needs at least three to five years,” said the aforementioned source.

This July, Li Rongrong, former head of the SASAC, said: “I am confident in reducing the number of central SOEs to 100 in this year.”

This means that the progress of reducing the number of central SOEs is far behind the foundation of the State New Assets Management Corporation, which is another state-owned investment company in China.

According to the SASAC, the mission of the State New Assets Management Corporation is to accelerate the reorganization and restructuring of the central SOEs. It will be entrusted to manage the assets of some SOEs with small size, tiny profits, bad profits and the fate of being eliminated. Its foundation is to help the SOEs trapped in trouble get rid of the headache. The SOEs that have entrusted this new company to manage their assets share these common features: having difficulty in maintaining their management, haunted by the shortage of resources, lacking capital and troubled by huge debts.

The State New Assets Management Corporation aims at “helping the stagnant SOEs collect their resources in the fields where they have advantages and funding them in their reform”.

“De-corporation”

Shao Ning disclosed the orientation of the central SOEs’ reform: to turn the large-sized SOEs into real listed companies.

The progress is as follows: firstly, to help them get rid of the loads; secondly, to remove the unnecessary parts of the SOEs, only leaving the listed companies having engaged in the major business; thirdly, to conduct the operation and management according to the requirements of capital market.

The goal of restructuring central SOEs mentioned by Shao Ning is not easy to realize. Presently, most of the central SOEs in China are haunted by bad assets and excessive loads. If the government plans to turn these central SOEs into “innocent and load-free listed companies”, it is necessary to liquidate these bad assets.

The aforementioned source said that the reform to the central SOEs borrowed the experience of their European peer. “Once the government needs money, it could reach the goal through the capital market. The only difference from the European companies is that the shares belong to the government instead of the individuals.”

On one hand, the ultimate goal of the SOEs’ restructuring is to make them leaner and more efficient; on the other hand, the current management and operation pattern of the SOEs need to be changed in order to make sure each part of them can carry out orders efficiently.

An expert in the SASAC explained the importance of the establishing headquarters the central SOEs. Presently, many central SOEs in China have not been fully marketized. The companies have to go public at first and then focus on their major business to remove unnecessary parts of them.

Foreigners to Take Part in

Having foreign capital take part in the restructurings of the central SOEs is also plan for the reform to SOEs. In addition, the foreign capital’s taking part in the central SOEs saw the twilight with the foundation of the State New Assets Management Corporation.

A source said that Temask from Singapore was interested in the central SOEs’ restructurings. In 2005, Temask and the SASAC founded a cooperative team, whose leader was Wang Yong, present leader of the SASAC.

The source said that the foreign capital from Singapore is safer compared with the one from the other countries, In China, the investment from Singapore is easier to be approved by the government.

Apart from directly introducing foreign capital into the restructurings, making the central SOEs go public in the overseas market is also put into consideration.

Shao Ning stressed the importance of making central SOEs go public in the overseas stock market. “The biggest destination for the SOEs is the Hong Kong Stock Exchange.”

The stagnant process of making SOEs go public some SOEs even withdrew from the foreign exchange market doesn’t prevent the SASAC from believing that the level of corporate management is closely related with the capital market the companies rely on. If they are settled in a mature capital market with complete regulations, the listed companies have to consummate their own governance and management.

Now, the SOEs are planning to add more overseas stock markets into their destinations of going public. Minemetals once planned to list its overseas capital MMG in Australia. However, in consideration of the supervision environment and safety, Minemetals finally chose Hong Kong. It is reported that some SOEs have worked out the plans of going public in Europe or the USA.