State Asset Regulator Calls for Faster, Bolder Changes

China’s state-owned asset regulator pledged faster and broader efforts to open state-owned enterprises (SOEs) to private capital in the latest call to reform the country’s bloated state industrial sectors.

The five-year-old mixed-ownership reform campaign will be carried out in all state companies in competitive industries such as real estate, manufacturing and telecom, said Weng Jieming, deputy director of the State-owned Assets Supervision and Administration Commission (SASAC), the country’s top state asset regulatory body. The reform will especially focus on subsidiaries of central government-backed SOEs and local government-owned enterprises, Weng said Wednesday at a conference briefing on SOE reform plans.

Weng also made a rare pledge to expand mixed-ownership reform to key industries like electricity, oil and gas, railways, aviation and military equipment, where state dominance continues.

At the same meeting, China Unicom Group’s chief accountant Zhu Kebing said the telecom company is looking for private partners for its businesses in five Yunnan cities as part of a reform pilot program unveiled in October.

The mixed-ownership reform first emerged in a policy document in 2013. It is an initiative pushed forward by the central government to bring private investment and management into state-owned companies to make them more dynamic.

Since then, dozens of SOEs have unveiled plans to invite private sector investors into their subsidiaries, including China Unicom, China Shipbuilding Industry Corp., and the parent of China Eastern Airlines.

The next step is to increase the number of companies involved in pilot programs and pick larger and more important players in key industries to participate, Weng said.

According to SASAC, more than 70% of centrally owned SOEs and 88% of provincial-level SOEs in competitive industries have undertaken mixed-ownership reforms.

Through the reform, state capital will gradually withdraw from competitive industries and mainly concentrate on industries with strategic importance, SASAC said. Currently, about 80% of central government assets are in industries including crude oil and petrochemical, electricity, military equipment, telecom and mining, according to the administration.

Chinese authorities have repeatedly made commitments to advance SOE reforms this year. On the sidelines of the China International Import Expo earlier this month, SASAC chief Xiao Yaqing encouraged more foreign and private investors to take part in reforming central government-controlled enterprises.

In September, the National Development and Reform Commission published a statement calling on centrally administrated SOEs to explore feasible paths for mixed-ownership reforms at the highest corporate levels, marking the first official call for such sweeping reform of central SOEs.

In August, SASAC listed 404 central and provincial SOEs as candidates for reform pilot programs. Weng said about two-thirds of the shortlisted companies have submitted plans for mixed-ownership reform.

The regulator expects to see companies in “Shanghai, Shenzhen and Shenyang to make bolder steps in mixed-ownership reform,” Weng said.

Weng said SASAC is working on new regulations for state asset management as a key document to support SOE reforms. The rules will allow regulators to shift focus from governing state companies to managing state capital to improving corporate governance and independence of state companies, according to Weng.

China Unicom is one of the first batch of SOEs selected to participate in the mixed-ownership reform. Last year, the company sold 35% of its Shanghai unit to 14 strategic partners, including internet giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd.

By inviting private partners to construct and operate part of its telecom networks in Yunnan, China Unicom expects to turn some of its long-term money-losing subsidiaries profitable, Zhu said.

Contact reporter Han Wei (weihan@caixin.com)