China Releases Details of New State Reform

China has unveiled details on Sunday of restructuring its huge state business sector, including some privatization, as new data pointed to a cooling in the second largest world economy.

The guidelines that were issued jointly by the Central Committee of the Communist Party and the cabinet of China known as the State Council included plans of cleaning up and integrating some state companies, said Xinhua the official news agency. More details elaborating on the reform were not released.

Reform of the underperforming enterprises that are state owned is one of the most pressing needs of the China government.

However, if it is not handled well, the new restructuring could lead to hundreds of thousands of layoffs and great social instability.

The news agency said plans were included to introduce a mixed ownership by bringing in private investment and by 2020, it hopes to have decisive results.

The government of China is not forcing mixed ownership nor is it setting a timetable, allowing each firm to move ahead only when conditions are mature.

The government of China manages over 111 companies centrally located under SASAC control and manages close to 25,000 state owned companies and the sector employs close to 7.5 billion.

State companies will have the right to bring in a number of investors to diversity share ownership and other state companies will be encouraged to restructure to help pave the way for listing on the stock exchange, said Xinhua.

Private investors are going to be encouraged to purchase stakes in firms operated by the state, buy bonds that are convertible issued by state companies or swap shares with state companies, it announced, adding that steps are to be taken to curb all corruption during these reforms.

Beijing must convince the entrenched interests at the national, provincial and local governments, to let go of some control over the state businesses.

It would need to entice investors to purchase shares after one of China’s worst crashes in the stock market in history.

The news agency indicated that privatization on a full-scale basis was not going to happen.

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