SOE Reform Fund Plans 30 Billion Yuan in Projects

(Beijing) – The head of a government-managed fund charged with financing and speeding up structural reform at state-owned enterprises (SOEs) says it plans to invest 30 billion yuan ($4.36 billion) to support several projects in 2017.

In an interview with Caixin, Zhu Bixin , the president of a SOE Structure Adjustment Fund said the company will engage in various investment strategies, including offering funds to support SOE mergers and acquisitions, as well as company overhauls.

Funds will also target state-owned companies saddled with excess capacity, particularly companies in steel manufacturing, coal mining and cement industries.

To date, the fund has gotten behind 10 projects, Zhu said. For one recent project, he said, the fund served as a cornerstone investor by buying $100 million worth of shares tied to an IPO last year on the Hong Kong stock exchange for the state-owned securities firm China Securities.

In the future, Zhu said, the fund plans to invest in nationally strategic business sectors and innovative businesses tied to SOEs, such as companies involved in energy conservation and new technologies.

China Chengtong, supervised by the State Council's State-owned Assets Supervision and Administration Commission (SASAC), launched the investment fund last September.

Initial funding has come from shareholders representing 10, SASAC-managed SOEs. Plans call for the fund to grow to 350 billion yuan, including 131 billion yuan in registered capital by next year.

To date, Zhu said, the fund's shareholders have contributed 26.2 billion yuan, or 20% of the planned registered capital. The fund plans to raise that amount to 30% by the end of September and 100% by the end of 2018.

“We will take into account the amount of funding we’ve already built when we make investments,” said Zhu. “If any significant projects emerge, we will negotiate with fund providers to arrange early capital contribution.”

Zhu said the fund's shareholders are expecting an annual return rate of 8%.

The Chinese government launched its SOE reform campaign in 2013 in part to cut overcapacity in industries such as steel making. The reform paralleled efforts to improve the nation's economy promoted by Chinese President Xi Jinping and other leaders.

In an annual government work report released in March, Premier Li Keqiang said about 65 million tons of steel and 290 million tons of coal were cut last year as a result of SOE reform.

Contact Dong Tongjian (tongjiandong@caixin.com)