31 Aug 2016
Six Types of SOEs to Exit Beijing Market
The Beijing State-owned Assets Supervision and Administration Commission has recently issued guidelines on accelerating the exits of underperforming state-owned enterprises (SOEs) not aligned with the capital city’s strategic functioning.
Included in the exit list are six categories of enterprises failing to fulfill the capital city’s strategic functioning, such as high energy consumption, high water consumption and high pollution enterprises; enterprises in the excess-capacity sectors of iron and steel, coal, cement, building materials and at the bottom end of industry supply chains; enterprises suffering from long-term losses, with no prospect of generating profit.
Municipal SOEs exits take various forms, including asset restructuring, equity transfer, shutdown and production stoppage, licence revocation, winding-up, and the newly added relocation. Different forms of support will be given to three types of enterprises, namely, for resolving excess capacity, requested by the Beijing municipal government to shut down within prescribed time, and taking the initiative themselves to exit. Certain amount of support will be available for the redeployment of affected employees, transfer of retirees for social security management costs, administrative expenses of retired cadres and non-operating assets transfer fees. Execution of the exit process will be included in the scope of the performance evaluation of persons-in-charge of enterprises as well as a major item for evaluation in the Board of Directors, inspection of Board of Supervisors, and economic responsibility audit process of enterprise principals.
The six types of SOEs are:
1. High energy, high water consumption and high pollution enterprises;
2. Enterprises in excess capacity sectors including iron and steel, coal, cement and building materials, and at the bottom end of industry supply chains;
3. “Zombie” enterprises with long-term losses, no prospect for making profit, maintaining operation mainly through government subsidies and sustained bank credit, shell companies, and enterprises with business licence revoked for a long time;
4. Grade IV or below enterprises with unruly management;
5. Enterprises with relatively small state equity ratio and actual control;
6. Other enterprises not aligned with the capital city’s strategic functioning.