China starts new round of SOE reform

China's latest reform of state-owned enterprise (SOEs) is underway in Shanghai and Guangdong with a recombination of state-owned assets. Shanghai, the touchstone of China's economic development, took the first step toward restructuring, when two major SOEs announced a merger agreement, Shanghai Securities News reported Thursday. Shanghai East Best International Group has acquired the total equity of Shanghai Lansheng Corporation. Both companies were previously held by the Shanghai State-owned Assets Supervision and Administration Commission. The long-awaited merger raised the curtain on a new round of SOE reform in Shanghai, and how these two huge companies operate as one in the future remains a focus. According to financial reports, Lansheng Corp. and East Best Group realized business incomes of 1.33 billion yuan (218 million U.S. dollars) and 68.4 billion yuan in 2012, respectively. Meanwhile, Guangzhou, capital of south China's Guangdong Province, has set up a new system of supervision for state-owned assets, the newspaper reported on Wednesday. Previous systems featured myriads of separate regulations from local supervision commissions and the departments of finance, publicity and transportation. The new system establishes integrated supervision. Peng Peng of Guangzhou's SOE Supervision and Administration Commission told the newspaper that the city was examining Singapore's Temasek style of investment management . As a pioneer of reform, Guangdong announced in 2011 it would securitize more than 60 percent of its assets by the end of 2015, but with only two years remaining, the securitization rate remains at just 20 percent, worth about 4 trillion yuan, according to the report. The resumption of initial public offerings (IPOs) could be one way for Guangdong to meet its target. IPOs in China went on hold in October of last year, with around 700 firms left in the IPO pipeline. On Nov. 30, the Securities Regulatory Commission unveiled a complete overhaul of the IPO system, a major step toward market-oriented IPOs. Lyu Yesheng, director of the Guangdong assets commission, promised the newspaper that capital supervision of state-owned assets would be reinforced. A decision published on Nov. 15 following the Third Plenary Session of the 18th Communist Party of China Central Committee urged improved management of state-owned assets, and said that qualified SOEs will be reorganized to establish state-owned assets.