NDRC denies foreign majority ownership in SOEs

Whether the non-public sector, including foreign investors, will be allowed to take a controlling stake in State-owned enterprises (SOEs) has attracted fresh attention, as remarks by an official of China's top economic planner Monday caused speculation and confusion about a possible breakthrough in the country's huge State economy.

Responding to a reporter's question at a Monday press briefing about whether private and foreign investors can merge with or take a controlling stake in SOEs, Lian Weiliang, a deputy head of the National Development and Reform Commission (NDRC), said the answer lies in the decision made at a recent major Communist Party of China (CPC) meeting concerning the ownership of the economy.

According to the reform decision released on November 15 by the Third Plenary Session of the 18th CPC Central Committee, China will encourage non public-owned capital to participate in the SOE reforms, and "encourage non-public capital to hold controlling stake in mixed ownership enterprises."

The Beijing News newspaper reported after Monday's press briefing that Lian said China will allow private and foreign investors to take a controlling stake in SOEs following the press briefing.

The paper apologized later on Monday, saying that the report was incorrect due to the reporter's misinterpretation of Lian's remarks.

The deputy head of the commission has never said that China will allow private and foreign capital to hold a controlling interest in China's SOEs. The Beijing News "wrote the report at will," a staff member at the press office of the NDRC, told the Global Times Monday.

Despite the NDRC's denial, the issue whether to allow the non-public sector to hold a controlling stake in SOEs has been at the center of debate.

"The future direction of SOE reform will legally recognize the equal status of State-owned, private and foreign capital. The boundary of the State-owned economy will be weakened to include not only traditionally defined SOEs but also listed companies with their shares held by the public," Tian Yun, editor-in-chief of the China Macroeconomic Information Network website, run by the China Society of Macroeconomics, a government think tank, told the Global Times on Monday.

"That means except the key areas such as those connected with State security and strategic resources, which will be solely State-owned or in which the State will take a controlling interest, all other areas will be opened up," Tian said.

Private enterprises have contributed to more than half of the country's GDP, according to the semi-official All-China Federation of Industry & Commerce.

"The biggest highlight of the decision from the plenum on SOE reform is developing the mixed ownership economy. All but those 100 percent owned by the State, private and foreign investors, can be called mixed ownership economy," Zhou Fangsheng, China Enterprise Reform & Development Society told the Global Times Monday.

According to Zhou, the definition of mixed ownership economy has extended the scope of the public-owned economy and whether non-public sectors will be allowed to take a controlling stake in SOEs will be decided accordingly.

"For highly competitive sectors, the stake of the SOEs could be reduced to below 40 percent," Zhou said.

Xu Baoli, director of the Competitiveness Research Department of the State-owned Assets Supervision and Administration Commission (SASAC). a State assets regulator, questioned the difficulty in supervising enterprises if private and foreign investors are allowed to take a controlling stake in SOEs.

"If private and foreign investors become the controlling shareholder in the SOEs, who will be their supervisors," Xu said.

Currently, China allows foreign investors to buy shares in SOEs but the shares are usually below 49 percent. One exception is Alcatel Shanghai Bell in which French-headquartered Alcatel-Lucent acquired 50 percent plus one golden share of Alcatel Shanghai Bell.

But Alcatel Shanghai Bell is administrated by the SASAC, according to the company's profile on its website.