China to Unveil State Assets Management Company in August

By Kang Yi
Published: 2010-08-06

Issue 480, August 2, News, Cover

Translated by Liu Peng
Original article:[Chinese]
China's state-owned assets watchdog will unveil its new assets management firm to consolidate select state-owned companies under the control of the central government to better govern state resources in the middle of August this year.

People close to the matter revealed to the EO that Liu Dongsheng, Chairman of the Board of Supervisors of State-owned Assets Supervision and Administration (SASAC), the body responsible for managing the country's 15 trillion Yuan of non-financial state-owned assets, will serve as general manager and party secretary of the new company - Guoxin Asset Management Company.

At first, some ten centrally-owned enterprises will join the new company and more enterprises will join the company as time goes by. With its considerable scale of assets and functions, the new entity has been compared to the China Investment Corporation (CIC), the state's 200-billion US dollar sovereign wealth fund and has been dubbed as the "CIC No.2" project.

A source who took part in the establishment of the new firm said that unlike the CIC that focused on equity and financial investments, the new asset management firm would serve as an "Industrial CIC" to operate state-owned assets.

The EO learned that the appointment of personnel is the biggest obstacle delaying the SASAC in establishing the new firm. A source close to the matter said, "Since getting approval from the State Council in March this year, the establishment date of the new firm has been delayed again and again."

A senior official from the SASAC said, "Both the chairman and general manager must be a person with a deep understanding of national resources because after the new company is set up, they will, to a large degree, implement the SASAC's decisions."

Therefore, he thinks Liu Dongsheng is the right person to head the new firm. Liu Dongsheng served as director of the SASAC's Enterprise Reform Department, whose one task is to establish the new firm.

"However, if Liu is assigned as the new firm's president, he must resign from his present official position," the above source said.

According to Public Servant Law, public servants can not engage in or participate in profit-making activities and get a part-time job in enterprises or profit-making organizations.

The EO learned that the start-up capital of the new firm will be taken from the State-owned Capital Management Budget, a fund that collects a portion of the bonuses of centrally-owned enterprises every year.

The company reportedly will have 20 billion Yuan as its registered capital, but this is yet to be confirmed by the SASAC. However, the EO learned that the SASAC has reported to the Ministry of Finance that of the total planned expenditure of 44 billion Yuan in the State-owned Capital Management Budget, 18.3 billion Yuan will be used in restructuring the state economy and reorganizing China’s industrial structure.

According to the SASAC's plan, the number of centrally-owned enterprises will be trimmed down to 100 from the existing 125. Meaning, if enterprises fail to merge with other centrally-owned enterprises, at least 25 firms will be packed into the new firm.

The above-mentioned source stressed, "After the new firm is set up, the SASAC will not immediately consolidate mature enterprises into the new company. Ten centrally-owned enterprises who are smaller in scale and weaker in competitiveness will be the first to be incorporated into the new firm."

After the new asset management firm is set up, the biggest change will be that the SASAC will alter its method of supervision of some small centrally-owned enterprises - gradually converting its capital usage to pursue investment returns rather than administrative work.

This article was edited by Rose Scobie