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SOE reform plan promotes mixed ownership

The long-awaited blueprint for reforming and revitalizing the State-owned sector has been released and it promises to give a huge boost to China’s battle against the downward pressure on its economy.

More importantly, the latest plan will introduce “mixed ownership” by bringing in private investment. And the government expects “decisive results” by 2020.

If they succeed, such reforms will improve the efficiency of SOEs by forcing them to embrace market competition more aggressively and become financially self-supporting.

The plan advises shareholding reforms in all commercial SOEs. Private investors can participate in SOE’s business in various ways including by investing, acquiring shares or buying debts.

But.. for those SOEs that operate the lifelines of the national economy, or are related to national security, state capital must remain the dominate position in shareholding.

For those SOEs classified as public services, state capital will play the sole role, but they can include private capital by outsourcing services or permitting franchises.

The plan also encourages oil, natural gas, power, railway, and tele-communication SOEs to offer more projects to private companies.

In addition, the plan encourages state capital to invest in private businesses and employee shareholding programs.