Big-ticket fund set up for SOEs in China

$30.6b earmarked for mixed-ownership reform, cutting-edge technology

China launched a 200 billion yuan ($30.6 billion) fund in Shanghai on Tuesday to facilitate mixed-ownership reform and cutting-edge technology innovation at its State-owned enterprises, according to the country's top State assets regulator.

The big-ticket fund aims to sharpen the core competitiveness of SOEs and spur high-quality growth. It will have an initial capital of 70.7 billion yuan, which has been raised from 20 shareholders, including 11 centrally administered SOEs, a private company and an institutional investor, such as China Reform Holdings Corp and China COSCO Shipping Corp. China Chengtong Holdings Group Ltd, a State-owned asset-operating company, is leading the fund.

The new fund will support mixed-ownership reform projects by setting up sub-funds, joint investments, and other investment avenues to better serve the nation's three-year action plan for SOEs (2020-22), said Hao Peng, head of the State-owned Assets Supervision and Administration Commission of the State Council.

The launch of this fund came after the 14th meeting of the Central Committee for Deepening Overall Reform reviewed and approved the three-year action plan in late June. The plan puts forward clear requirements for establishing a mixed-ownership reform fund to optimize and upgrade the State-owned economy.

The fund will reinforce the role of the market in allocating resources via professional and market-oriented investment management and decision-making procedures, said Zhu Bixin, chairman of Beijing-headquartered China Chengtong.

It will guide SOEs, social capital, private companies and other entities to jointly participate in businesses related to high-end technologies and key projects across the country, as well as build a business community with stakeholders from various backgrounds, he said.

Under the government plan, the funds will be used in the mixed-ownership reform of strategic industries, such as national reserves, oil and gas pipeline networks, power grids, communication infrastructure, the development and utilization of strategic mineral resources, and other vital sectors that involve national security and economy.

Zhu said that supported by reform, the fund is also aiming to effectively revitalize existing State assets both at home and abroad, particularly in fields like information technology, high-end equipment manufacturing, new materials and biomedicines.

"We will also widen presence in fields like scientific and technological innovation, intensify the connection with strategic emerging industries led by 5G networks, artificial intelligence, data centers and industrial internet, as well as high-quality assets from pension and healthcare sectors," he said.

Apart from pushing SOEs and private businesses to make more breakthroughs in technology innovation, the fund will also help expedite the pace of mixed-ownership reform in State-owned scientific research institutes and explore new collaboration space in the course of military-civilian integration, and build better platforms for industries where China is striving hard to catch up with its international peers.

Li Hongfeng, China Chengtong's president, said the fund will enrich central SOEs' capital channels and help them better advance mixed-ownership reform, improve modern corporate structure and deal with systemic financial risk, 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 funds will boost the government's ability to better serve the real economy," he said.

Because shareholders of the new fund company cover both centrally and locally controlled SOEs, it would coordinate resources flexibly to avoid overlap in investments, said Zhou Lisha, a researcher with the research institute of the SASAC.

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", she said.

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