China Eyes Overseas Capital to Invigorate SOEs

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Last updated at: (Beijing Time) Friday, August 30, 2002

China Eyes Overseas Capital to Invigorate SOEs

The local government of south China's Shenzhen is trying to usher in overseas investment to diversify the equity structure of five once State-controlled infrastructural firms.

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The local government of south China's Shenzhen is trying to usher in overseas investment to diversify the equity structure of five once State-owned infrastructural firms.

After the restructuring, 25 percent of the equity in the energy firm will go to foreign holders, while the percentage of equity controlled by foreign investors in water supply-&-treatment, gas, public transportation firms will stand respectively at 45, 24 and 45 percent, according to the China News Agency.

The foodstuff firm will offer totally 70 percent of its equity to two foreign investors, with one holding 30 percent, the other, 40 percent.

In addition, the gas firm will also transfer 16 percent of its total shares to a domestic investor.

The Shenzhen government currently owns the five firms, each monopolizing their respective infrastructural market with an annual revenue of 900 to 4,700 million yuan (US$109 to 568 million), according to the Beijing-based Securities Times.

By this move, the Shenzhen government hopes to reshuffle these firms' share structure, hammer out an efficient corporate governance and finally realize the purpose of maintaining and increasing the value of the State-owned property, Shenzhen Mayor Yu Youjun was quoted as saying by the newspaper.

China's on-going reform of its inefficient State-owned enterprises (SOEs) has now come to the sensitive issue of how to truly clarify the owner of SOEs' property right, a point the Chinese Government has been trying to avert during the past decades-long reform.

But now, a thorough restructuring of SOEs' property right is gaining an upper hand in the debate among both economists and policy-makers for deepening SOEs' reform.

A complete privatization of SOEs seems still off-limits, however. The compromised option seems to allow more shareholders, including foreign investors, into State firms.

The State Economic and Trade Commission, the supervisor and manager of nearly all domestic enterprises, has been reportedly mapping out a guideline for introducing foreign equity holders into SOEs, but there is no specific plan coming out yet so far.

International intermediaries have already started to assess the assets value of the five firms. The whole equity restructuring process is to wind up by the end of this year, according to the Shenzhen government.

International investors have shown avid interest in the project, which will offer Shenzhen government experience for more similar actions afterwards, Yu was quoted as saying.

By PD Online staff Forest Lee

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