China’s leadership is preparing massive mergers for State-Owned Enterprises to eliminate inefficiency and grow national competitiveness. They announced that there will be specific guideline for restructure of over one hundred thousand State-Owned Enterprises in a few months.
Energy, resource and telecommunication industries which are strategically important sectors are main targets of restructure. These enterprises will be reorganized as asset investment companies and managed like private businesses. The purpose is to lower the reliance on government and to invigorate the mobility of private funds. The government is already pressuring the SOEs to maximize profits and prepares them for public listing. After the merger, state companies are required to hand the government 30% of their profits by 2020, a 15% increase from now.
Though this consolidation plan can streamline the management of state asset by organizing as asset investment companies but the consolidation might possibly discourage private participation in the economy by regulating private investors to hold controlling stakes in state firms and continue its favor to SOEs in subsidizing resources over private businesses.