China Pushes Forward Reform Of Its State-Owned Enterprises

China’s State-owned Assets Supervision and Administration Commission of the State Council (SASAC) has proposed to establish State Capital Investment Companies (SCICs), in a move that signals a step forward for state-owned enterprise (SOE) reform.

China’s SASAC has selected the State Development & Investment Corporation (SDIC) and China National Cereals, Oils and Foodstuffs Corporation (COFCO) to become state capital investment companies in a pilot program.

Similar to Singapore’s Temasek Holdings, SDIC and COFCO will hold ownership rights of SOEs on behalf of SASAC. Both SDIC and COFCO are large conglomerates running a combination of competitive, market-oriented operations.

In a report, Fitch Ratings says this is a step forward towards the separation of SASAC’s dual roles as a shareholder and regulator of state-owned assets.

The rating agency expects the SASAC to give priority to SOEs in less strategic market-oriented sectors in promoting hybrid ownership, while reforms for SOEs in strategic sectors are likely to be slower.

In addition, SASAC also allowed China National Building Material Company and Sinopharm Group Company Limited, along with Xinxing Cathay International Group, China Energy Conservation and Environmental Protection Group to let their board of directors exercise the rights to senior management hiring, performance reviews, and compensation management.