China plans enterprise reform

An outline of the plans to reform state-owned enterprises released on Sunday indicated decisive results were expected by 2020.

The reforms will include the introduction of "mixed ownership" by bringing in private investment. Private investors are to be encouraged to buy stakes and convertible bonds or swap shares with state firms.

State-owned firms currently have easier access to government policy support, subsidies and bank loans than private enterprise. This special status has allowed under-performing state companies, particularly in the north east of the country, to be propped up by taxpayers and consumers.

As growth has slowed in China, reform of the huge state-owned firms has become a priority for the Communist Party's Central Committee and the State Council, China's cabinet. The plans were issued jointly by the two bodies.

They include plans to integrate some state firms, but no details were given of which companies could be involved.

There are 111 central government-owned conglomerates, which account for about 60 percent of state-owned enterprise revenue. They are overseen by the State-owned Assets Supervision and Administration Commission (SASAC).

Earlier this year, it was reported that the number of conglomerates could be cut to 40 through mergers. Analysts suggest the energy, resources and telecommunications sectors as ones marked for mergers.

Chinese President Xi Jinping is due to visit the US and the announced changes are being seen as a commitment to change but a continuation of the state's dominant role in the Chinese economy.

Official news agency Xinhua reported the government aimed to "cultivate a large number of state-owned backbone enterprises with innovation capability and international competitiveness."

"In the process of deepening reforms of state-owned enterprises, the leadership of the party can only be strengthened, not weakened," Zhang Yi, head of SASAC said in a statement released on Sunday.

Figures out on Sunday showed factory output and fixed-asset investment were both weaker than expected in August.

The government has announced a full-year growth target of about 7 percent.

jm/bw (Reuters, AFP)