Government Outlines New Plans for Reforms in State Owned Enterprises

Government Outlines New Plans for Reforms in State Owned EnterprisesThe Chinese government outlines several of its new plans for reforms in the State owned sector, which will include allowing some SOEs to create their own investment divisions. According to the assistance minister of finance Xu Hongcai, there are more than 110 state owned firms that are currently administered by State Owned Assets Supervision and Administration Commission are now allowed to have their own investment arms.

Based on the new system, State owned Assets Supervision and Administration Commission are allowed to authorize these companies as share holders of State owned enterprises that are operating core businesses and these companies serves as a layer between the market and the government. Earlier this year the government started testing the system in the Province of Shangdong. The Shangdong Luxin Investment Holdings Group and the Shangdong State owned Assets Investment Holdings were created to act as investment arms for state run companies in the province. The creation of these types of investment companies help with the efficiency.

State owned enterprise turn into independent market entities help maintain and increase the value of state assets, and at the same time state assets regulators in different levels have more time to focus on how to supervise and manage state assets better. This way SOEs operating efficiency will be improved together with the supervision efficiency. The move also helps in the stabilization of the stock market.

As State owned enterprises dominates China’s A-share market, guidelines that will deepen reform of state owned enterprises are offering these companies more freedom that will ensure future development. The reforms gradually enhance a SOE’s efficiency and increase the valuation of the shares particularly among blue chip stocks.

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