News Analysis: BoCom spearheads ownership reform in banking sector

Following the approval of its reform plan, the Bank of Communications (BoCom) became the first commercial bank to start the reform of mixed ownership, following in the footsteps of several other state-owned companies (SOEs).

Mixed ownership allows non-state capital to invest in state-owned sectors, while making sure that the state holds the controlling stake, to increase the competitiveness and influence of state assets.

The country's fifth-largest commercial bank said in a statement filed to the Shanghai Stock Exchange Tuesday that its overall reform plan had been approved by the State Council, or China's cabinet, citing a notice from the country's central bank.

Since early 2014, large SOEs, including Sinopec, PetroChina and State Grid, announced plans to carry out mixed ownership reforms.

The bank will optimize its equity-ownership structure through the introduction of private shareholders, giving full play to strategic investors, while exploring how the bank's management team and employees can secure stakes, BoCom said.

Lian Ping, chief economist of BoCom, said that like other SOEs, state-owned banks have ample room to conduct mixed-ownership reforms, although some are already subject to diversified ownership.

"BoCom first introduced foreign capital between 2003 and 2004, but has seldom done so again since," Lian said.

At present, state capital accounts for a substantial share in state-owned banks and, thus, some medium and small shareholders are not very well represented.

Reducing state capital's share will free up state funds for construction projects, while diversifying ownership structures to better represent the market's role, according to Lian.

By the end of March 2015, 54 percent of BoCom was state-owned. China's Ministry of Finance owns 26.53 percent, London-based HSBC 18.7 percent and the National Council for Social Security Fund 4.43 percent.

Previously, investors have wagered on the bonus of mixed-ownership reform for the bank. On June 1, 4 and 8, the bank's shares jumped by the daily limit of 10 percent, a rare occurrence for any large commercial bank in China.

On Wednesday, it's shares edged up 0.78 percent, lower than the 1.65 percent rise posted by the Shanghai Composite Index.

A landmark 2013 document identified the private sector's role in fostering economic growth and job creation, and said a diversified ownership economy model would be followed to allow more SOEs and other firms to develop into mixed ownership companies.

In February 2014, China's top oil refiner Sinopec announced that it would bring in private capital to jointly sell its oil products, the first SOE to unveil a mixed ownership reform plan. Endi