Experts: Expanded program key to helping firms grow, enhance their roles in real economy

China's move of adding new State-owned capital investment companies will help those selected groups better integrate industrial chains based on their demand and make effective strategic investments, which will better support the real economy, analysts said on June 22.

The government issued a notice earlier this week, stating that five centrally administered State-owned enterprises have officially become State-owned capital investment companies, owing to their accurate positioning, outstanding capital operating ability and effective structural adjustment on deployment plans.

These companies are State Development and Investment Group Co Ltd, China National Building Material Group Co Ltd, China Baowu Steel Group Corp Ltd, China Resources (Holdings) Co Ltd and China Merchants Group, according to the State-owned Assets Supervision and Administration Commission of the State Council.

In addition to promoting the reasonable flow of State-owned capital into major industries and key areas, State-owned capital investment companies aim to serve the national strategy, optimize State-owned capital distribution, enhance industrial competitiveness and upgrade industrial structure in areas related to national security and the economy.

With China accelerating the optimization of State capital and industrial restructuring during the 14th Five-Year Plan period (2021-25) and creating role-model companies to foster high-quality growth, the pilot program of State-owned capital investment companies is expected to be further expanded, said Wu Gangliang, a researcher at the China Enterprise Reform and Development Society in Beijing.

State-owned capital investment companies will play an active role in optimizing the layout of State-owned assets and reinforcing the country's self-reliance strength in the field of scientific and technological development, Wu said, adding it will further separate ownership of State-owned capital and management rights of enterprises, to support the market-based operations of State-owned capital.

SASAC started to choose 19 central SOEs to carry out pilot projects for State-owned capital investment companies in 2014. Sales revenue of these groups jumped 22.1 percent on a yearly basis to 9.5 trillion yuan ($1.41 trillion) in 2021, while their net profit reached 690 billion yuan, accounting for 40 percent of central SOEs' total last year.

State-owned capital investment companies should improve their capital investment and operation capabilities, enrich capital operation methods and tools, and use fund management, asset acquisition, equity investment, professional restructuring and other methods to inject more assets into listed companies, and improve the securitization of State-owned assets, said Li Jin, chief researcher at the China Enterprise Research Institute in Beijing.

"Their subsidiaries should also accelerate the pace of mixed-ownership reform, and deeply transform the operating mechanism through the reform," Li said.