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December 30, 2015

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State-owned enterprises to be split into 2

CHINA yesterday unveiled a guideline to divide state-owned enterprises into strictly commercial entities and those that serve government ends, such as power and health care suppliers.

The guideline, published by the Ministry of Finance, the National Development and Reform Commission and the State-owned Assets Supervision and Administration Commission, follows a September blueprint that promised to modernize SOEs, improve the management of state assets and promote mixed ownership.

“One-size-fit-all reforms are less effective than targeted reforms that are tailored on the basis of SOE classification,” an official said.

According to the guideline, mixed ownership is encouraged in both kinds of SOEs to reduce the dominance of state companies and ensure better management.

Public feedback will have a bigger weighting when authorities assess the performance of SOEs that serve social purposes, while commercial SOEs will be mainly assessed by their competitiveness and profitability, the guideline says.

Authorities also pledged more freedom for managers.

China has about 150,000 SOEs, which hold over 100 trillion yuan (US$15.7 trillion) in assets and employ more than 30 million people. Many have become ossified by declining profitability due to a lack of competition. Some even earned the nickname “zombie enterprises,” muddling along with government bailouts.


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