context: The highest-level meeting so far in 2020 for SOE (state-owned enterprise) reform was held in Beijing deploying major policy directives. Although the 3-year action plan has not been publicly released, in recent months high-level officials have hinted at a reform direction of SOEs worth watching for.
The flagship ‘3-year Action Plan of SOE Reform’ is being fully launched, and is expected to be released to the public shortly, according to Xinhua Finance. Overall directives are out on 27 September, with Liu He 刘鹤 Vice Premier heading the meeting of the State Council SOE Reform Leading Group.
Five requirements are put forward for the implementation of the 3-year action plan, including
- making SOEs market players with core competitiveness
- allowing SOEs to play a greater role in
- leading innovation
- improving the industrial supply chain
- safeguarding people's livelihood and coping with major challenges
- maintaining national economic security
SOEs must first be true market entities, with innovation a top concern. The highlight is the emphasis on achieving innovation through incentive schemes, notes Li Jin 李锦 China Enterprise Development Research Centre.
In particular, SOEs will play a leading role and influence the development of private enterprises. Depending on different concentration requirements among industries, SOEs must
- help improve market structure
- cooperate with private enterprises to promote M&A and strategic reorganisation
- strengthen the synergy between upstream and downstream of the supply chain
- jointly create advantageous industrial clusters with private enterprises
In the past, M&As were mainly between large SOEs, notes Zhu Shanbo 祝波善 SOE restructuring expert. M&As with private firms are new and could mean
- M&As and strategic reorganisation will be important for future economy upgrades
- restructuring may face various difficulties, but enterprises should improve synergy
- the integration of state-owned and private capital will be ‘deeper and broader’ in the future