Caixin
Dec 27, 2016 05:11 PM
ECONOMY

Beijing Plans to Allow Workers to Buy SOE Shares

(Beijing) — Employees of some state-owned enterprises (SOEs) in Beijing will be allowed to own up to 30% of their company’s shares, state media reported Tuesday, as China accelerates mixed-ownership reform of SOEs.

The city’s state-owned asset watchdog has selected an unspecified number of SOEs under its supervision to take part in the shareholding restructuring, the China Securities Journal said, without naming any of the firms.

The total employee shareholding will be capped at 30% and a single worker will not be allowed to own more than 1%, the report said, citing a recent release by Beijing’s State-Owned Assets Supervision and Administration Commission.

Employees will be able to buy shares or receive a stake allocation based on scientific or technological research contributions, it said.

The value of SOE assets controlled by the city’s government was 3.4 trillion yuan ($489 billion) at the end of 2015, the official Xinhua News Agency said in an earlier report.

Beijing’s move is seen as a concrete step forward in the country’s mixed-ownership reform. The Chinese government hopes to improve the efficiency and competitiveness of lumbering SOEs through the initiative, which allows private capital to invest in the state sector.

Top leaders at an key economic policymaking conference earlier this month labeled the project “an important breakthrough point” for SOE reform in 2017 and vowed to make progress in state monopolized industries such as energy, telecommunications, transportation and the military.

Opening investment in SOEs to employees is expected to boost the morale of workers and encourage them to work harder by linking their own interests more closely with the company’s fortunes.

Some of China’s SOEs introduced employee shareholding plans in the 1980s. But such arrangements were later called off due to problems that included losses of state assets, Xinhua said previously.

Analysts have warned of potential risks such as the transfer of benefits to non-employees, especially officials, who could obtain SOE shares at low prices or for free and then sell them at a premium after the firms list on stock exchanges.

Regulators should also be wary of potential attempts by management to take control of SOEs as they are in an advantageous position to get a hold of employee’s stakes, experts have said.

In an apparent bid to address these concerns, the national state-owned asset regulator, in rules issued in August regarding employees’ shareholdings of SOEs, stipulated that the state must retain control of companies and keep no less than 34% of total equity.

The regulations also set a 36-month lockup period for staff investors after firms are floated on the stock market, and limited the shares board directors and senior managers can sell per annum after the end of the three years at 25% of the total stake they have.

Contact reporter Fran Wang (fangwang@caixin.com)

 

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