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China releases guide for SOE mixed ownership

China Daily, September 25, 2015 Adjust font size:

The State Council gave foreign investors a clear signal on Thursday, welcoming their participation in the country's mixed-ownership reforms as well as in making improvements to its security review mechanisms－a step indicating continued movement toward reforms necessary to attract more foreign investors.

Foreign investors are invited to take part in the country's reform and reorganization of State-owned enterprises, forming joint ventures and other cooperative arrangements through overseas mergers, financing cooperation and offshore financing, the State Council said in a guideline for the development of mixed-ownership SOEs, which was released on Thursday.

The State Council released a blueprint for SOE reform in mid-September, aiming to improve the efficiency of State-owned enterprises with total assets of more than $15 trillion.

Apart from continued opening-up, China will further improve the system for security reviews of foreign assets on the basis of the Catalog for the Guidance of Industries for Foreign Investment, along with related security review regulations, to reduce risks, it said.

He Shaoqi, a professor at the Chinese University of Political Science and Law, said the guideline sends a clear signal that China will continue to open up.

He said the new guideline is in line with plans released on Tuesday to establish a new national market access system for domestic and foreign investors as well as recent speeches made by Chinese leaders for deepening reforms and opening-up.

Mixed-share holdings of State-owned capital, collective capital and non-SOE capital will be an important form of China's fundamental economic system, the document said.

The guideline set no timetable for completion of reforms, and a variety of approaches are allowed.

Market-oriented companies with their main business in competitive sectors are encouraged to steadily promote the mixed-ownership reform, with the goal of it becoming dominant.

The new guideline divides natural monopoly industries into two parts: a monopoly portion and a competitive portion.

For the monopoly portion, the SOE's assets should be mostly or solely State-owned, including key telecommunication infrastructure; crucial transportation hubs; development of important water, forest and strategic mineral resources; major pipelines of oil and natural gas; electricity networks; nuclear facilities; important public technical platforms; and special industries such as the military.

Huang Qunhui, a researcher with the Institute of Industrial Economics at the Chinese Academy of Social Sciences, said: "Those sectors should treat both private and foreign investors equally for purposes of passing security reviews."

The competitive portions of some industries will be open to non-SOEs－for instance, qualified non-SOE companies are encouraged to take part in construction and operations by way of franchise and government purchases of service in the telecommunications infrastructure business.