President Xi Jinping´s economic reform seem to include also the powerful state-owned companies, by allowing private investors to invest in the SOE. But much more is need to call it real reforms, tells economist Arthur Kroeber to Reuters.
However, much more needs to be spelled out before private investors will be confident of any privatisation scheme, analysts caution. Corporate governance at state-controlled joint ventures remains problematic and management often puts national interest ahead of minority shareholders.
Private investors also may be wary of the risk of nationalisation. The government set off howls of protest when it forced out private investors from the oil fields in northern Shaanxi province in 2005, and coal mines in neighboring Shanxi province four years later.
“A lot more is needed. (Incremental and marginal privatisation) in of itself doesn’t do much,” said Arthur Kroeber, head of research at Gavekal Dragonomics, an independent global economic research firm.
“I find it hard to imagine a substantive privatisation of these big central SOE’s. In that context, I find it hard to imagine how bringing in marginal outside investors will have a fundamental impact on the behavior of these companies.
“There needs to be a break with the traditional joint venture model.”
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