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State-owned rail firms reorganizing assets
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STATE-OWNED railway construction contractors, China Railway Group, and one of its subsidiaries, China Railway Erju Co, halted trading of shares yesterday after announcing asset reorganization plans.
Both the companies said a final decision would be announced sometime this week with shares expected to resume trading on Friday or earlier.
The move follows a guideline, which was released on Sunday, to push state-owned enterprises to become independent market entities. The State Council said China will modernize SOEs, enhance management of state-owned assets, promote mixed ownership and prevent the erosion of state assets.
Headquartered in Beijing, China Railway Group’s business includes survey and design, construction and installation, industrial manufacturing, real estate development, resources and mineral products, and financial investment.
According to the company’s financial report in 2014, 80 percent of its revenue came from construction, property business contributed 5 percent, while industrial manufacturing took up less than 4 percent.
Last year, the company started internal restructuring to better divide its business.
Chengdu-based China Railway Erju Co mainly deals in contracts on traffic and civil construction projects and was the first railway company in China to be listed.
In 2014, more than half of its revenue came from non-railway construction projects, while railway construction accounted for 18 percent.
The two companies are expected to possibly merge their construction and property business to avoid repetition and potential competition.
However, the reform process won’t be easy, according to Xinhua news agency.
Having enjoyed a dominant market position and favorable situations such as easier access to loans, many SOE heads will understandably be unenthusiastic about allowing the winds of change into their organizations.
“Most SOEs still have much to do to turn themselves into fully independent market players inside and out,” said an insider on condition of anonymity.
State assets regulators will offer guidance to SOEs through government-backed capital investment and operation platforms like Singapore’s Temasek to avoid direct government intervention, according to Xu Hongcai, assistant minister of finance.
The 20-page reform agenda, which reportedly took over two years to draft, called for a gradual move to mixed ownership, and setting a deadline of 2020 for its major targets to be achieved.
“This round of SOE reform is more market-oriented, and it is expected to yield big results with relatively little hardship by invigorating the whole economy,” said Li Jin, deputy head of the China Enterprise Reform and Development Society, a think tank managed by the State-owned Assets Supervision and Administration Commission (SASAC).
Critics of Chinese SOEs say their ownership lacks transparency, they benefit from too much government intervention, and are inefficient and unresponsive to market conditions.
While allowing private capital into SOEs, the government will also encourage state capital to be invested in private enterprises, especially those in public services, sophisticated technology and environmental protection, Li Weiliang, deputy head of the National Development and Reform Commission, said yesterday.
There are currently 110 state-owned conglomerates administered by the SASAC, while many more SOEs are owned by local governments.
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