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18:37, 28-Feb-2018
New tack on reforms: China Unicom sets example for SOE reforms
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China Unicom, the country's second largest telecom operator, plans to add more star managers from the private sector to its board of directors. The company is one of the leading lights of reform in China's state-owned enterprises (SOE). Experts said that changes at China Unicom will affect other SOE reforms this year.
China Unicom's latest reform plan calls for hiring another six managers to join its board of directors. Notably, five of the eight candidates are not from China Unicom, but rather from Baidu, Tencent, Alibaba, JD.com and China Life Insurance.
VCG Photo
VCG Photo
The move will be a further step following the company's decision last year to allow private investors to hold more than 35 percent of its shares, and followed that up with staff cuts in an effort to improve efficiency.
Other state firms are following suit. China's three major airlines received the green light from the government to relax the state domination of their share-holdings, allowing more investment from private and even foreign companies. Analysts say that it all means further reforms to come in China's key industries.
“Unicom's reform is inspiring others, like the aviation industry. The most important message is that we should change the situation in which state-owned shares control everything,” said Professor Zhang Huiming from School of Economics at Fudan University, “stronger private capital will push state capital to change its old ways and improve efficiency.”
VCG Photo
VCG Photo
Zhang also noted that there will be resistance to further reforms as some companies are not comfortable with the idea of letting in more private investment. Shao Yu, chief economist of Orient Securities, said that this is why more examples should be set.
“Unicom now provides an example. I think coming up with more regulations is not the most important step right now, it is rather to use more and more successful examples in each industry to ignite the confidence of private companies, and to encourage them to participate in the SOE reforms,” said Shao.
Apart from carrying out reforms company by company, there are other experiments ongoing. By the end of 2017, Shanghai had set up an investment fund involving more than a dozen Shanghai SOEs. The fund aims to facilitate mergers and acquisitions in industries including new materials, new energy, environmental protection and technology development.
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