The announcement of mixed-ownership reform of China Unicom in August 2017 is considered a forward-looking experiment for one viable direction of SOE reform, says Gao Minghua 高明华 Beijing Normal University SOE reform researcher. Pioneering though it may appear, the depth of mixed-ownership reform, especially in institutionalising the modern corporate governance system, remains to be seen, he adds.
- shareholding structure
- three state-owned shareholders, China Unicom (36.67 percent), China Life (10.22 percent) and SOE Structural Adjustment Fund (6.11 percent), collectively hold 53 percent of total shares, signalling that state capital still controls the company
- private involvement would not be powerful enough to check state-owned capital
- enlarging involvement of private capital could potentially stimulate technological spillovers from leading private high-tech companies to China Unicom
- board member selection
- assuming there are 15 positions on the board, representatives for state-owned capital are expected to take seven or more, leaving only three positions for private capital, as the law requires at least five independent board members, says Gao
- very difficult for private investors to truly engage in and influence the decision-making process
- manager selection
- although the project alludes to forming a diverse board of trustees and senior management and exploring marketised recruitment of managers, whether recruitment is open to all applicants without interference from the Party committee is yet to be confirmed
There is little successful precedent in mixed-ownership reform; even if proportion of shares held with state capital is not predominant, state capital still maintains significant influence. Strong private capital is necessary to balance state capital to achieve the intended outcome of mixed-ownership reforms, concludes Gao.