China is now opening consideration to let private investors take bigger shareholdings in state owned or controlled companies. This, according to one official, is one of the moves undertaken by the Beijing government to usher in more private sector involvement in other areas of the economy.
According to an official from the State-owned Assets Supervision and Administration Commission or SASAC, "We welcome private capital to invest in the state-owned enterprises. And there are many ways to do that." The comments were made following a report by the newspaper China Daily last Monday. The news report confirmed that it would allow private investors to own up to 15% of the state firm's capitalization.
SASAC oversees over a hundred of the State's largest owned or controlled enterprises said there was no official word yet on the cap for shareholdings. The source, who sought anonymity, also did not name the sectors that would be affected by the decision.
The top leadership of the Chinese Communist Party are set to meet in Beijing to draw up plans for the economic roadmap of the second largest economy in the world. The state owned enterprises are believed to be one of the major discussion points at the Third Plenum. Other matters for discussion include lowering of barriers for private sector players in state owned or controlled companies or the increase in the retention of profits instead of redirecting the same to government.
Undertaking reform in state enterprises have been very difficult because of the size and the revenues generated allow them to gain political clout. According to some economists, as China's growth slowed down, the government sees the need to address the perceived inefficiencies undertaken by these protected enterprises.
SASAC in an statement issued last month, stated that the reform of state firms could include providing private investors greater access to industries and market statements that were formerly dominated by the State.
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