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August 19, 2016

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China to steer SOEs to give staff stocks

CHINA has decided to pilot an employee stock ownership plan in some state-holding enterprises this year to improve their competitiveness, the country’s state-owned enterprises watchdog said yesterday.

Qualified employees in some SOEs in businesses that are fully open to competition can buy a certain amount of company stocks, according to guidelines released by the State-Owned Assets Supervision and Administration Commission of the State Council.

This initiative aims to incentivize employees, as equity-holders, to work harder to improve company competitiveness.

The state stakeholder of the pilot company should hold at least 34 percent of the company’s total equity to ensure state-owned status, while stakes belonging to employees should be under 30 percent, with each individual employee owning no more than 1 percent of the total, according to the guidelines. They also specify the qualifications of pilot enterprises, requirements for stake-holding and stake transfers, as well as other details. If the pilot works well, it will be gradually promoted from the end of 2018 in an effort to invigorate SOEs.

An economic downturn has put pressure on China’s SOEs, which are at the forefront of an official drive to reform the country’s growth model and cut overcapacity.

SOE profits fell 8.5 percent annually in the first half year, narrowing from a 9.6 percent drop between January and May, according to official data.


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