China Announces SOE Shakeup: Too Little Too Late To Matter

What are SOEs? Who Benefited From Them?

SOEs are State Owned Enterprises. The SOEs made millions for the people who controlled them, largely corrupt local politicians along with the politicos friends and associates.

The SOEs also created jobs, but did so at huge expense: By taking productive land from farmers, by massive pollution, vacant cities and malls, forced migration, axcn

an untenable reliance on fixed investment growth.

Overcapacity is rampant. We now see the effects in steel and cement production, crashing commodity prices, capital flight, and a plunging stock market.

China Announces SOE Shakeup

As a proposed remedy to this mess, China Plans Shake-Up of State-Owned Enterprises to Boost Growth.

China has unveiled the much-awaited guidelines for reform of its bloated state-owned enterprise serfctor as the latest official data show its economy continuing to slow.

The guidance from the State Council, China’s cabinet, calls for a shake-up of SOEs with share sales and management changes planned to reduce losses and improve efficiency, reported Xinhua, the official news agency, on Sunday.

“The guidelines suggest that by 2020, the goals in all the main reform areas should be accomplished, constituting a system that is more suitable to the nation’s socialist-market economy,” said Xinhua. “The SOE system should be more modernised and market-oriented. It should make for higher economic vitality, higher control, greater influence and SOEs will be more risk-resistant.”

China has more than 155,000 SOEs, employing tens of millions of people in all sectors from banks to hotels and airlines to oil refiners. But while the vast majority are managed by local governments, there is a core of more than 100 large nationally strategic groups, including ICBC, the world’s biggest bank by assets, and China Mobile, the world’s biggest network by subscribers, controlled by Beijing.

The State Council said that SOEs would be classified as either playing a social or commercial function, to better integrate them with the market economy.

The government will then “actively introduce different investors” and push SOEs for public share sales, although most analysts believe that wholesale privatisations are highly unlikely.

Analysts at ANZ argued last week that this round of SOE reform could be a “game-changer” in China’s economic development.

But they warned that “SOE reform will still be a gradual process” and it is “unlikely that the government will relinquish its tight control and involvement over the SOEs, especially those in strategically important sectors”.