Shanghai authorities have vowed to push forward the restructuring of the city's state sector by revealing more major players that are to undergo reform aimed at creating a bunch of mixed-ownership joint-stock operations with a strong competitive edge.

Major state companies in the port, automobile, construction and foreign trade sectors in Shanghai will be targeted in the next stage of the massive restructuring, which started last year and has made substantial progress so far, revealed officials from the city's State assets supervisory body.

"Our previous aim was to complete the restructuring of major local State-holding companies in two to three years, and it looks now that this goal is achievable," said Wang Xiaoyuan, deputy director general of the Shanghai State-owned Assets Supervision Commission.

Wang made the remarks yesterday when addressing the Shanghai People's Political Consultative Conference (SPPCC), a key think-tank for local authorities.

The city's top policymakers have given the go-ahead for the plan to further Shanghai's restructuring of state ownership, Wang said.

"We need to foster a number of competitive players in selected key sectors, whose operating mechanism should undergo big change through the reform," said Wang.

Local authorities overseeing the restructuring want to reduce the city's proportion of state assets, while increasing total social assets, according to Wang.

Official statistics indicate that by the end of 2003, Shanghai's total State assets amounted to 620 billion yuan (US$74 billion), recording growth of 12 percent on a yearly basis.

The total figure includes some 450 billion yuan (US$54 billion) worth of operating assets, as well as over 160 billion (US$19 billion) of non-operating assets.

Shanghai set out in 2003 to massively reshape its major State-owned enterprises.

The process started with the creation of the Bailian Group through the merger of four key commercial and distribution businesses.

The city also saw the formation of Jinjiang International Holdings Co, through the merger of two major hotel management and dining operators.

Later, Shanghai Electric (Group) Co (SEC) started to usher in a number of strategic investors to form a new business combining cash investments with 6.5 billion yuan (US$756 million) worth of SEC's core assets.

Shanghai Nonggongshang (Group), Shanghai Light Industry Holding (Group) Co and the Shanghai Electric Apparatus Research Institute have meanwhile finished their initial restructuring.

"We should gradually deepen and further improve the reform in those companies despite the current achievements," said Wang.

"We cannot expect it (the restructuring) to be completed at one go," he said.

Apart from reform in a number of key large state-owned enterprises (SOEs), the local authorities are also trying to work out guidelines for the restructuring of the city's small and medium-sized SOEs.

"Generally, there would be no state stakes in such small and medium-sized companies (after the reform)," Wang said.

However, there still exist a number of thorny issues awaiting the policymakers.

For example, how to work out a proper and widely-accepted reward mechanism for top company management after restructuring is still a headache, experts said.

Also, how to achieve a good balance between the increase and relinquishment of State ownership, so that State assets can be competitive in selected sectors in the long run, needs to be taken into serious consideration, experts said.

(China Daily June 16, 2004)