Fund to spur mixed-ownership reforms

China is establishing a 70.7 billion yuan ($10.8 billion) fund to facilitate mixed-ownership reforms of its State-owned enterprises.

Chengtong Holdings Group Ltd, an investment company of the State Council's State-owned Assets Supervision and Administration Commission, will jointly establish the fund with several central and local SOEs, including Shanghai International Port (Group) Co Ltd and China COSCO Shipping Co Ltd, said an SIPG announcement on Wednesday.

The company administering the fund will be registered in the Lingang Special Area of China (Shanghai) Pilot Free Trade Zone and will mostly invest in the mixed-ownership reform projects of SOEs, and equity investments projects of State firms in the private sector.

The establishment of the fund comes at a time when China has decided to advance mixed-ownership reform of SOEs and enhance cooperation between State enterprises and private companies during the 14th Five-Year Plan (2021-25) period. It also aims to promote the structural adjustment of the State-owned economy.

Since 2013, China has completed more than 4,000 cases of mixed-ownership reform with more than 1.5 trillion yuan of non-State capital involved, according to the SASAC.

The next three years will be crucial for the country's SOE reforms, according to a statement issued after the 14th meeting of the Central Committee for Deepening Overall Reform in June.

The meeting called for renewed efforts to optimize the structure of the State-owned economy to make it more competitive, innovative, influential, and more able to withstand risks, and decided to establish such funds within the year, according to the SASAC.

Liang Jun, president of the Guangdong Association of State-owned Capital, said mixed-ownership reform will not only generate fresh commercial vitality and diversify global sales channels for central SOEs, but also introduce a market-oriented remuneration system to better reward outstanding performance and incentivize innovation.

Based on government guidelines, the fund should be operated and managed in accordance with the principles of "limited assistance, emergency protection, risk control and market rule-based operations", he said.

He said the fund will enrich central SOEs' capital channels and help them better advance mixed-ownership reforms, improve modern corporate structure and deal with systemic financial risks, in the face of a complex and severe global economic situation with growing uncertainties.

"Since China aims to build a group of world-class, benchmark SOEs that lead in high-quality growth, empowering such firms or funds will boost the government's ability to better serve the real economy, especially in industries where China is striving hard to catch up with international firms," he said.

Hu Chi, a fellow at the research institute of the SASAC, said mixed-ownership reforms will help diversify the equity structure of SOEs and modernize their administration and operations. The new fund will facilitate reforms as it can efficiently meet the investment needed for various purposes like debt repayment.

Besides, since shareholders of the new fund company include both central and local SOEs, the fund can better coordinate resources of both central and local SOEs to avoid overlap in investments, he said.