By Xiang Anbo & Zhang Yanlong, Enterprise Research Institute, DRC

Research Report, No.191, 2021 (Total 6256) 2021-7-8

Abstract: State-owned capital investment and operation companies are market entities in nature, whose existence hinges on their ability to create value. Therefore, while bringing the functions of State-owned capital investment and operation companies into play, it is necessary to consider how they can create value as enterprises. First, these companies are supposed to be viewed as independent legal entities and they need to shift their focus on investment portfolio rather than business performance with less thought on consolidated financial statement with subsidiary companies. Only in this way can the value creation capability of State-owned capital investment and operation companies be reflected in an objective and authentic manner. Besides, as these companies are not directly engaged in production or operation activities, their value must be created through the companies with their investment for production and business operation. Therefore, State-owned capital investment and operation companies need to have parenting advantages and to be adequate parent companies of their subsidiary companies and they need to take this as their goal for adjusting and optimizing their investment portfolios. In addition, as State-owned capital investment and operation companies are exclusively State-funded and backed by the government as the only shareholder, they need to conscientiously restrain their power and authority in a bid to improve their value creation capability.

Keywords: State-owned capital, investment portfolio, parenting advantage, value creation