SOE reforms to get impetus

The nation will consider transferring State-owned assets into preferred stock and the State special share management system, a senior official said.

"The government is conducting research on the preferred stock mechanism and the State special share system, and we expect to have a clear direction by the end of this year," said Peng Huagang, deputy secretary-general of the State-owned Assets Supervision and Administration Commission of the State Council.

The State special share system is similar to the concept of golden shares or special rights, that was adopted by the British government in the last century. The State Council first proposed the system in 2015 as part of the shareholding system reforms in State-owned enterprises.

The country will explore the State special stock management system in special areas to ensure the dominant position of State-owned assets, according to State Council documents.

Transfer of State-owned assets into preferred stock will essentially transfer management control to private entities while guaranteeing the priority rights for profits.

"This and the preferred stock mechanism will make the State-owned assets more flexible," said Li Jin, a researcher at the SOEs Reform and Development Center of Beijing-based Renmin University of China.

"It will increase the number of private capital in the SOEs and exchange management rights for capital," said Li. "Such a system will benefit industries such as media that require flexible management but also need to comply with the government. If there are potential problems that threaten the country's benefit, the preferred stock will have the right of one vote veto."

"The concept of golden shares will benefit private and foreign capital and indeed it is an innovation," he added.

Gao Zhiyu, deputy director-general of asset management bureau of SASAC, said that the country has made considerable progress in mixed ownership reforms of SOEs.

According to Gao, the achievements from the first two batches of SOEs that underwent the reforms are way beyond expectations.

By the end of 2017, seven of the 19 SOEs in the first two batches of reform have gained strategic investors or gone public after reforms or set up new companies. Over 40 investors were introduced to the SOEs with over 90 billion-yuan ($14.27 billion) capital, according to Gao.