26 October 2016
SASAC head Xiao Yaqing said the new fund will help focus state capital on strategic and forward-looking industries. Photo: Xinhua
SASAC head Xiao Yaqing said the new fund will help focus state capital on strategic and forward-looking industries. Photo: Xinhua

China launches US$52.5 billion fund to restructure state firms

China has launched a 350 billion yuan (US$52.5 billion) to restructure state enterprises.

The capital raised by the China State-owned Enterprises Restructuring Fund will be used to boost the competitiveness of some state-owned enterprises (SOEs)  and their international operations, including overseas acquisitions, Reuters reports, citing a document about the State-owned Assets Supervision and Administration Commission (SASAC), which will manage the fund.

“Among SOEs controlled by the central government, some have excess capacity while others are suffering from a severe lack of capacity,” SASAC head Xiao Yaqing told state radio on Monday.

“Setting up this new fund will help concentrate state capital on strategic and forward-looking industries.”

The fund will have an initial registered capital of 131 billion yuan provided by 10 SOEs.

The 10 firms investing in the fund include China Mobile Ltd. (00941.HK), China Railway Rolling Stock Corp. (601766.CN) and China Petroleum & Chemical Corp. (00386.HK, 600028.CN).

Key investment areas of the fund include assets pertaining to national security and are of economic importance such as strategic reserves of natural resources, oil and gas pipelines, power grids and telecommunication infrastructure, according to the SASAC document.

China has made reform of its lumbering and uncompetitive state firms a priority as weak global demand drags on economic growth and excess capacity and idle workers bleed what precious resources companies have at their disposal.

For some sectors like coal and steel, restructuring has meant closures of mines and plants, and layoffs.

For others, it has meant high-profile marriages to create national champions with the heft to compete globally.

Last year, Beijing ordered the merger of top train manufacturers China CNR Corp. and China CSR Corp.

“This fund aims to facilitate the destocking and deleveraging process,” said Zhou Hao, senior emerging markets economist at Commerzbank.

China’s state sector employed around 37 million people in 2013, and accounts for about 40 percent of the country’s industrial output.

The retrenchments are China’s most significant layoffs since the restructuring of SOEs from 1998 to 2003.

That round of reforms led to around 28 million redundancies and cost the government about 73.1 billion yuan in resettlement funds.

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