Privatization of Chinese Companies Coming

According to a new analysis by PriceWaterhouseCooper, China's state-owned enterprises (SOEs) are facing the most dramatic shake-up in a decade. The establishment of the powerful State-owned Assets Supervision and Administration Commission of the State Council (SASAC) in March 2003 marks a historical step in government attempts to ameliorate the protracted problems of the debt-ridden SOEs, which are officially worth some 10 trillion yuan (US$1.2 trillion) and total 181,000 companies. This is also likely to trigger a new round of privatization in the country and to provide new business opportunities for foreign and domestic investors.

In the years to come, China's SOE restructuring will need to be set on track, no matter how difficult the process. With WTO concessions kicking in and China's central finances weakening with rising demand for subsidies and pension funding, time is not on the government's side.

In the process, SOE restructuring will create enormous business opportunities for foreign multinationals and the domestic private sector, as they have recently been allowed to purchase controlling stakes in SOEs which were previously off-limit.

Of particular interest to foreign investors could be those industries with monopolistic positions in the market or with wide distribution networks. The reduction of state shareholding in the listed companies and the disposal of SOEs by local governments could be a good starting point.

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