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China's Titanium Enterprises Into The Throes Of Reform
Jan 20, 2017

In 2015 the national SASAC supervision system of corporate profits fell 6.2% year-on-year decline, the central enterprises profit trend has been effectively curbed, the annual added value grew 2%, turned over to the national fiscal revenue grew 4.6%, 106 central enterprises 99 profit. Despite the same macroeconomic downward pressure, but in the first 11 months of 2015, the scale of industrial enterprises, private enterprises profit growth of 5.2%, but state-owned enterprises fell by 22%. In the central enterprises in charge of the meeting, the SASAC director Zhang Yi also admitted that the reform and development of state-owned enterprises will enter the throes of the year".

The "labor pains" first from metal, coal, petroleum, petrochemical and other industries in a large number of zombie companies exist, and these enterprises mainly get together in the state-owned enterprises, therefore, for the sac, clearing zombie companies heavier tasks. In the A-share market, 244 central enterprises and its controlling listed companies in the loss of A reached 67, accounting for more than 27%. Sinopec's petrochemical oil service to become the loss of the king, the first three quarters of 2015 operating loss of $2 billion 60 million. And so BaoTi listed state-owned enterprises but also the loss of disaster area". Resource industry and heavy industry in the zombie enterprise is the main cause of the decline in state-owned enterprises profit point". Zhang Yi introduction, if the deduction of petroleum and petrochemical enterprises, the central enterprises profit is actually increased by 7.5%. Therefore, in his view, the disposal of zombie enterprise has been around the ridge, but is necessary to do surgery, to use today's small shock to resolve the future of the big earthquake". 

It is worth noting that the sac for the first time to clean up the zombie enterprises delineated timetable. Zhang Yi said that the SASAC is studying the development of programs, and strive to use 3 years or so to complete the main task, to complete the work before 2020. For the next step work, Zhang Yi requirements, the main responsibility of the central enterprises group company is the disposal of "zombie" companies, the SASAC will supervise the supervision of key enterprises, and the disposal of the zombies "into the scope of supervision and inspection on the board of supervisors. Li Jin believes that the reform of state-owned enterprises is to reform the system level, and clean up "on the supply side of the zombies" is the reform of structure level, currently has a simple system reform to the property system and industrial structure of "two quartets" reform.

For cleaning up zombie companies, after a number of officials said, to be more restructuring and bankruptcy, to properly resettled workers, reduce the impact on society, reduce economic and social risks. To promote the merger and reorganization of state-owned enterprises, the main topic of the meeting is also responsible for the central enterprises. Zhang Yi stressed that the increase in merger and reorganization of the group level, promote the combination; promote the restructuring of specialization, the industry leading enterprises as the basis, through equity cooperation, asset replacement, free transfer etc., to further strengthen the homogenization of business integration and integration of industry segments. State owned assets supervision and Administration Commission (SASAC) highlights three restructuring models, namely horizontal industrial restructuring, vertical chain restructuring and restructuring of leading enterprises. In Li Jin view, last year, the SASAC launched 6 on the reorganization of the central enterprises of the 12, in fact, is carried out in accordance with these three models, but the induction of the three models is the first time in the SASAC documents. To enhance the quality and efficiency of development of state-owned enterprises, actively zombie companies, deepen the reform of state-owned SOEs and promote SASAC reform, carry out public entrepreneurship, innovation, promote internationalization, strengthen supervision to prevent the loss of state-owned assets, and strengthen the party building of state owned enterprises.

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