Central SOE looks to further cooperation with domestic private enterprises

China National Machinery Industry Corp, also known as Sinomach, will expand its business in economies related to the Belt and Road Initiative in partnership with privately run companies this year, said a top executive.

The move is part of the company's efforts to incorporate mixed-ownership reforms to maximize benefits. The central State-owned enterprise mainly produces construction and agricultural equipment.

"To date, the number of completed projects or those under construction in B&R economies exceeded 773, with contract amount totaling $73.6 billion," Xu Jian, the company's deputy Party secretary and general manager, said. "Many of the projects were delivered under joint efforts between the group and private companies."

"The group's asset securitization rate has reached 58 percent, while its cooperation with privately owned companies has also increased." Xu added.

China National Electric Apparatus Research Institute Co, a subsidiary of Sinomach, introduced private enterprises, such as Zhejiang Chint Electrics Co and DunAn Holding Group Co, as strategic investors. In addition, its employee stock ownership plan was one of the 10 pilots among central State-owned enterprises.

Mixed-ownership reform acts as a major part of the overall reform of SOEs. It is pushed by factors including China's ongoing supply-side reform, the Belt and Road Initiative and many Chinese companies' "going global" strategies.

The reform also helped create a win-win situation for everyone concerned, Xu said.

He cited the example of YTO Group Corp, a Sinomach subsidiary, which has achieved stable collaboration with private suppliers. "In Luoyang, Henan province alone, YTO has developed over 400 suppliers, 70 percent of whom are privately owned."

Data show that the mixed ownership plan has resulted in Sinomach's rapid expansion.

The group posted revenue of 286.1 billion yuan ($45.46 billion) in 2017, a 34 percent increase from the previous year. Its profit climbed 30 percent year-on-year to 11.23 billion yuan, a new high.

For years, a group of central SOEs have been putting increased efforts in innovating and executing plans for mixed-ownership reform.

"Even though it is still at an early stage, central SOEs will face issues including monopoly and the placement of employees during the process of mixed ownership reform. But as these enterprises are all strong and competitive, they have the ability to solve problems such as employee placement," said Li Jin, chief researcher at the China Enterprise Research Institute.

"As for the monopoly issue, we cannot expect it to be solved in the short term. We can and will promote it gradually."