China establishes new fund to assist with reform of state-owned enterprises

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/39

While reform of China’s large, inefficient state-owned enterprises (SOEs) is one of the most critical reforms on the agenda, it is also a one of the most difficult reform and progress has been slow. This week a new fund was established to support SOE reforms. The fund will eventually grow to 350 billion yuan ($52 billion), and its assets will go to restructuring, improving competitiveness and financing foreign acquisitions of firms in strategic branches. The fund will be administered by the State-owned Assets Supervision and Administration Committee (SASAC), which is presently responsible for oversight of 106 large central government SOEs.

Smaller funds have previously been established to support SOE reforms, but their overall impact has been marginal. Corporate bankruptcies, winding down of failing subsidiaries or divisions, and corporate mergers have all gradually become part of efforts to return the sector to health, even if serious conflicts of interest have thwarted progress. Mergers are expected to reduce the number of SASAC-administered firms to under 100 by the end of this year.

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