SOEs’ Exit Should Leave more Room for Private Actors
The Global PE Beijing Forum was held on December 2nd. Mr. Siping ZHANG, former member of the standing committee of the CPC Shenzhen Municipal Committee, attended the forum with a speech on Mixed Ownership Reform and Restructure of the State Sector.
Recent years have witnessed the boom of SOEs in almost all competitive sectors, considerably crunching the playing field for private actors. The ongoing Supply-side Reform, according to Zhang, aims to restructure the presence of SOEs:
-De-capacity requires SOEs to be more efficient;
-De-leverage aims to lower their debt ratio;
-De-stocking addresses the problem of unbalanced internal structure;
-Shoring up the weak spots calls more SOEs to participate in sectors of strategic importance and those providing public welfare
Based on his experiences tackling SOE reform in Shenzhen, he identifies four areas where SOEs should exit first:
-Industries that have long suffered from over-capacity i.e. coal, steel, construction, raw materials and so on
-Competitive industries in which SOEs are not proportionate in performance i.e. business, logistics, services, trade, manufacturing and so on
-Profitable industries that do not fit in the national grand strategy of economic and social development or the long-term goals of the firms i.e. real estate
-Industries with high risks i.e. IT
Zombie firms and SOEs that wane in competitive sectors should first exit, suggests Zhang. He argues that first comes the exit of SOEs and then follows the introduction of private strategic investors to carry out the mixed-ownership.
Zhang further exemplifies the exit of SOEs in Shenzhen in industrial, technology, logistics and trade gives rise to the blossom of a variety of world’s leading and locally-nurtured private companies, such as Huawei, Tencent, DJI, BYD Auto, BGI, S.F. Express, just to name a few.
SOEs in Shenzhen have shifted towards infrastructure building and public welfare provisions, which ensure both the quality and safety of public services in the city.
