V-11 Question: It has been reported that China plans to set up 30-50 internationally competitive conglomerates by the year 2010, through restructuring of state-owned enterprises. Why China decides to restructure its enterprises? What are the strategies and goals?

A: State-owned enterprises (SOEs) are major players of the national economy, and their strengths are indicators of the strength of state ownership. The goal of ownership restructure is to nurture internationally competitive conglomerates.

China does not own world-class investment, development and research, marketing and distribution centers. Most of the SOEs are positioned at the low end of the global production chain, concentrating on manufacturing, labor and energy-intensive industries with low added value. Competition between nations is often realized through competitions between multinational companies. These multinational companies gain efficiency by optimizing resources across countries. If we do not readjust and restructure the SOEs, we cannot succeed in international competition.

The focus of readjustment and restructure of SOEs is to pool state-owned capital into key industries such as electricity generation and distribution, petrochemical industry, telecommunication, coal production, airlines and transportation, defense industry, as well as equipment manufacturing, car manufacturing, digital information industry, architecture and steel production. This will strengthen state ownership in these industries. The goal of the restructuring is to shift more state-owned capitals into industries key to the national security and economy, to industries with competitive edge, to sunrise industries and to big enterprises controlled by the central government. The concentration of capitals is to facilitate the formulation of internationally competitive conglomerates, which own self-developed intellectual property rights, renowned brands, and international competitiveness. By 2010, there will be about 80 to 100 such restructured companies, which will be overseen by a state asset-management committee.

(China.org.cn)