China will assess the state owned companies next year and will “severely deal with” the enterprises which have performed poorly, have been producing losses for a long time or do not comply with safety standards, according to the state news agency Xinhua.
Beijing authorities hope to move to a more efficient model, as the state remains the majority shareholder, but management is more focused on making a profit than on achieving political goals.
China also hopes that by making this change in strategy to contribute to solving the problem of industrial overcapacity, exacerbated by excessive investment of the state-owned companies.
Assets Supervision and Administration Commission (SASAC) is working on changes to help state-owned companies become more competitive globally, focus more on profit and bring a more important contribution to the economy, said the deputy head of the agency, Huang Shuhe. SASAC is a ministerial-level agency managed by the Chinese cabinet.
The Assets Supervision and Administration Commission Agency is directly supervising over 100 state companies, including Sinopec – the largest oil refinery in Asia, and China Mobile – the cellular phone operator with the most mobile customers globally.
State-owned companies have achieved a net profit of about 1,300 billion yuan ($214.22 billion) this year and the number of companies with losses was significantly reduced, according to Xinhua.
However out of more than 100 companies managed by the Assets Supervision and Administration Commission, only 11 enterprises have made a profit of more than 5 billion yuan, and many have still reported negative numbers.
The Agency is committed to “severely deal with” companies that are consistently reporting losses and those who do not comply with environmental and safety standards will be puniches, said Huang.
Financial analysts said that the biggest economy in Asia has to make changes and reform its state-owned enterprises. It is expected that by 2020 most state-owned companies will have diversified shareholders.
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