Source: Securities Daily   Date: Jan. 14, 2016

The original link: http://news.315.com.cn/20160114/100635039.html

As the first year of the "Thirteenth Five-Year Plan", the year of 2016 will see a vigorous promote of the supply-relating structural reforms, with the main direction toward the reform of state-owned enterprises’ mixed ownership. On January 12, Secretary-General of National Development and Reform Commission Li Pumin made it clear that the Commission has held a meeting with all industry regulation departments, and another meeting with central state-owned enterprises in electricity, railway, civil aviation, telecommunication, and military area. The next step will be to carry out corporate pilots.

The reporter of Securities Daily has collected the public information relating to the mixed ownership reform covering five major areas: power, railway, civil aviation, telecommunication and military, and found that the one of power is walking ahead. On the electricity sector’s mixed ownership pilot reform meeting at the end of last year held by National Development and Reform Commission, the State Grid proposed to introduce social capital into the four power grid projects- pumped-storage power plants, energy storage facility, electric vehicle charging and changing facilities, distributed power grid- connected engineering- In addition, the corporate listed resources will be reorganized and integrated, and enterprises meeting the conditions will be promoted to be listed. China Southern Power Grid has made such attempts in the field of power supply. On November 30, 2015, as the "vanguard" of the reform in China Southern Power Grid, Shenzhen Power Supply Bureau, along with five enterprises such as China Merchants Property Development, established Power Supply Co., Ltd of Qianhai & Shekou FTA of Shenzhen, which is regarded as the "first order placed for the mixed ownership reform relating to power distribution and sale".

In November 2015, China Huaneng Group’s subsidiary, China Yangtze Power Co., Ltd., conducted a restructuring exceeding RMB 100 billion, introducing other state-owned and non state-owned capital while injecting the Group’s large-scale hydropower assets into the listed company. Through capital operation, China Huaneng Group has participated in the shares of a number of local energy platforms, and made layout respectively in central, southern, eastern and other major markets of power sale. Currently, it has set up Fujian Electricity Distribution and Sale Co., Ltd.

While China Guodian Corporation, State Power Investment Corporation, and China Huadian Corporation also choose “diversified ownership structure” in their subsidiaries as a breakthrough of the reform, specifically wanting to promote the reform at the level of ownership structure, including overall listing and mixed ownership development so that strategic investors could be introduced at all levels, and power distribution and sale companies may be established.

According to Director of China Center for Energy Economics Research at Xiamen University Lin Boqiang, in the electric area the power sale-relating reform of mixed ownership has a lower threshold, leaving more opportunities for private capital. With a power sale-relating liberalization, private enterprises may be tremendously enthusiastic about investing in power, which will have more and more opportunities with deepening the reform.

The information on the reform in several other areas is much more sporadic

In the field of civil aviation, China Eastern Airlines, a listed company, introduced a foreign strategic investor Delta Air Lines, which is considered as a pilot demonstration in mixed ownership in civil aviation.

In terms of telecommunication industry, a listed company- Datang Telecom- announced in November 2015 that it has attempted a mixed ownership pilot reform in its two companies: Xinhua Ruide, and Datang Smart Card. Shanghai Pilot Free Trade Zone, once expected with high hopes, opened seven major value-added telecom businesses for pilot. Experiencing eager anticipation in early 2014, it has not yet had substantial opening actions.

In terms of mixed ownership reform in railway, General Manager of China Railway Sheng Guangzu said in March 2015 that China Railway will consider listed in the market in future, and implement a mixed ownership reform. However, so far the successful case in the railway reform of mixed ownership still remains in Beijing-Shanghai High-speed Railway Co., Ltd. established in December 2007, which is a marked-oriented institutional investor introduced for the first time in high-speed railway, but thereafter no private capital enters the area.

Military industry is one of the highlights of the state-owned enterprise reform. Haitong Securities Research shows the asset securitization rate of China’s top ten military groups is only 30%, compared to 70%-80% abroad that leaves huge space for continuous enhancement. How to break the ice in the ownership reform in the military Institutes of research has become a key step for all major military groups to further raise their asset securitization level.