09/14/2015, 00.00
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Despite Beijing’s plans to privatise SOEs, many doubts remain

Government announces plans to include private firms in state-owned enterprises, which have dominated the economy since Mao’s era. Despite their inefficiency, corruption, and poor profit margins, the former dominate key sectors like energy and telecommunications. Pledges of transparency and mergers with private capital have not dispelled doubts about who would run them. Meanwhile, Chinese shares continue to drop.

Beijing (AsiaNews) – China will restructure state-owned enterprises (SOEs) that are performing poorly and allow some to close, the deputy head of the country’s state assets supervisor said on Monday.

“We will make more efforts in reforming ‘zombie enterprises’, long-time loss-making enterprises and in disposing those low-efficient and non-performing assets,” said Zhang Xiwu, vice chairman of the State-owned Assets Supervision and Administration Commission, at a briefing in Beijing on plans to reform the country’s SOE sector.

Despite the country’s fast-paced modernisation, the fate of state-owned enterprises have been a major issue since Deng Xiaoping launched his reforms. Now change is crucial for the national economy.

The commission said that the reforms would give full play to the leading role of the state-owned sector, including energy and telecommunications.

However, this would include mixed ownership and private investment in the country’s sprawling state sector.

The goal is to make SOEs more globally competitive and increasing transparency in a powerful sector of the economy.

However, for many analysts and experts, the move is a bit late and not sufficiently transparent. Although private firms might come in, it is still unclear who will run the new companies.

In fact, the planned reforms involve mergers between major state-owned enterprises into stronger – and hopefully more profitable – state giants.

 “There’s no direct link between mergers of SOEs and the pledged reforms of the state system: the signals sent out so far are troubling,” said Gary Liu, executive deputy director of the Shanghai-based CEIBS Lujiazui Institute of International Finance.

”Mergers among central SOEs might harm the economy in the long run despite some short-term benefits. It might mean more [state] monopolies, lower efficiency, and setbacks for the planned market-oriented reforms,” he warned.

Still, the economy’s poor performance is pushing Beijing along the path of reform. China’s growth in fixed-asset investment, one of the crucial drivers of the economy, slowed to 10.9 per cent in the first eight months of the year – the weakest pace in nearly 15 years, the National Bureau of Statistics said on Sunday.

Factory output also was weaker than expected, rising 6.1 per cent in August from a year earlier. Markets had expected a 6.4 per cent increase, compared with July’s 6.0 per cent.

All sectors in the mainland market suffered, with information technology, brokerage companies and the manufacturing industry enduring the biggest losses.

Plunging shares also remain a major problem with investors still on a losing streak.

After a bad August, which came with several devaluations of the yuan by the central bank to cut losses and boost exports, Shanghai dropped by another 3.4 per cent today.

By contrast, European shares are holding their ground, whilst Wall Street gets ready to open for the day.

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