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SCIO briefing on reform of SOEs

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Speaker:
Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission of the State Council

Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office

Date:
Sept. 28, 2017

Bloomberg:

SOE mergers have been used to build single, large, powerful national champions, and this is happening with automobile builders and others. Can you tell us what are the next sectors to become the focus of mergers, and would shipbuilding be one of those, with Beichuan (China Shipbuilding Industry Corporation) and Nanchuan (China State Shipbuilding Corporation) involved?

Xiao Yaqing:

Anything can happen. I would like to ask Ms. Huang Danhua to answer your question.

Huang Danhua:

Thanks, Mr. Xiao, and thanks to the Bloomberg reporter for your concerns about the restructuring of central SOEs.

The restructuring of central SOEs is pressing ahead as part of the CPC Central Committee and the central government's strategic layout to reinforce SOE reform, a big move for SOEs to increase their competence and competitiveness.

Since the 18th CPC National Congress, the State-owned Assets Supervision and Administration Commission of the State Council has coordinated efforts with the pertinent authorities to restructure 34 central SOEs, including China North Railway, China South Railway, Baosteel Group, Wuhan Iron and Steel Corporation and China COSCO Shipping Corporation Limited.

In keeping up with the needs of the times, we have jointly founded the Aero Engine Corporation of China and China Tower, and the number of central SOEs has now amounted to 98.

Yesterday (Sept. 27), the State Council released a statement about work in the next phase after hearing the report on what had been done so far in regard to the restructuring of central SOEs.

The Bloomberg reporter just asked what we will do next. Actually, the State Council has made that clear at yesterday's executive meeting. All we need to do is to continue to fulfill the decisions.

As for the integration effect the journalist just mentioned, I think it is comprised of many facets rather than merely integration. Thus, the integration effect is shown in the following aspects:

First, horizontal mergers strengthen the enterprises' scales. In 2017, a total of 48 central SOEs were included on the list of the Fortune 500 globally, significantly improving their leading role and influence in the industry.

Vertical partnership generates complementary advantages and improved upstream-downstream coordination of the industry chain. It explores ways to solve long-existing problems in the development of some industries and greatly enhances the overall strengths of enterprises.

Integration also optimizes the allocation of resources. It increases the level of resource sharing and cuts off redundant projects. It saves investment as well as land, and also protects the environment.

Second, as far as structure optimization is concerned, the restructuring and integration of central SOEs speeds up excess capacity cuts, improves the technological innovation of enterprises by integrating their complementary advantages, cuts managing and operational costs, and steadily increases their economic benefits.

Third, integration has had remarkable effects for individual enterprises. Their main business is more prominent. Their organization and structure are more streamlined, and their internal management is more efficient. More efforts are made in the coordination of enterprises and other reform work.

Therefore, we should view the effects of structural optimization and integration from multiple dimensions. Practices over the years show that the restructuring and integration of central SOEs is not aimed to change their numbers. It mainly aims to optimize resource allocation as well as the layout and structure of the state-owned sector of the economy. It also aims to enhance the overall functioning and efficiency of the state-owned sector of the economy.

Next, we will persist in deepening reforms to further boost the structural optimization, restructuring and integration of central SOEs. We will continue to improve the flow of state-owned capital. We will motivate the central SOEs to strengthen their main business, speed up their transformation and improvement as well as improve their quality and efficiency for better growth. Thank you.