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SOE reform for pharmaceutical industry should go on: expert

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2018-07-30 15:51:49Global Times Editor : Li Yan ECNS App Download

Mixed-ownership reform for pharmaceutical industry should go on: expert

Mixed-ownership reform of State-owned enterprises (SOEs) will help enhance efficiency and make companies stronger, said experts, rebutting criticisms on the reform program after the appointment of a famous billionaire as Chief Executive Officer (CEO) of Yunnan Baiyao, a traditional Chinese medicine (TCM) manufacturer.

Chen Fashu, a businessman from East China's Fujian Province, was appointed on July 23 as CEO of Yunnan Baiyao, a major manufacturer of TCM whose history goes back to 1902. Critics pointed out the risks of bringing private capital to the pharmaceutical industry, as a fake vaccine scandal involving privatized former SOEs has recently rattled the country.

"People are now becoming sensitive because of the vaccine scandal, while nobody complained when private investors first came in 2017," Liang Jun, an SOE reform expert at the Guangdong Academy of Social Sciences, told the Global Times on Sunday. "Even if they both involve pharmaceuticals, these are two completely different cases," he cautioned.

Chen's appointment incited controversy as critics voiced concerns about selling valuable State assets to private businessmen. Yunnan Baiyao is a competitive pharmaceutical company that has enjoyed strong growth during recent years. 

Liang pointed out how financial success is not a valid standard for the introduction of mixed-ownership reforms.

"Mixed-ownership reform aims to place in modern corporate institutions, to make them more efficient and more responsive to the market. That a company is making money at the moment is not a valid argument to not engage in reform. A profitable company can also use private capital to expand and make even more money," said Liang.

Liang also noted that State assets are not being sacrificed in this case, as Chen's acquisition of Baiyao stock came through a capital increase in 2017, which gave him a 50 percent stake for an injection of 25.4 billion yuan ($3.73 billion). 

Subsequently, a third company, private medical equipment maker Jiangsu Yuwell, acquired 10 percent of Baiyao, also through a capital increase. 

"Many mixed-ownership reforms are being done through capital increases. State capital is not being sold, companies are attracting private capital, making the companies bigger and stronger," said Liang.

  

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