State-owned enterprises of China
A state-owned enterprise of China (Chinese: 国有企业) is a legal entity that undertakes commercial activities on behalf of an owner government.
The legal statuses of SOEs in China varies greatly, from being a part of government to stock companies, with the state as a regular or controlling stockholder. There is no standard definition of a government-owned corporation (GOC) or state-owned enterprise (SOE), and the two terms are often used interchangeably. The defining characteristics are that they have a distinct legal shape and they are established to operate in commercial affairs.
As of 2017, China has more SOEs than any other country, and the most SOEs among large national companies.[1] As of the end of 2019, China's SOEs represented 4.5% of the global economy[2] and the total assets of all China's SOEs, including those operating in the financial sector, reached US$78.08 trillion.[3]
State-owned enterprises accounted for over 60% of China's market capitalization in 2019[4] and generated 40% of China's GDP of US$15.97 trillion (101.36 trillion yuan) in 2020, with domestic and foreign private businesses and investment accounting for the remaining 60%.[5][6] Ninety-one (91) of these SOEs belong to the 2020 Fortune Global 500 companies.[7]
Role[edit]
When China's SOEs were first created, they served as instruments for carrying out national goals and providing social stability via the iron rice bowl.[8] Financial performance of SOEs was not a major concern until China's reform era.[9] With the exception of a small number of national monopolies, SOEs compete in the market as privately enterprises do.[10]
SOEs have a primary role in China's energy sector.[11] Its five large state-owned power generation companies are: Datang, Guodian, Huadian, Huaneng, and China Power Investment Corporation.[12] Its state-owned grid companies are State Grid Corporation of China (SGCC) and China Southern Power Grid Corporation.[13]
Most Chinese universities are SOEs.[14]
China's SOEs are at the forefront of global seaport construction, and most new ports built by them are part of the Belt and Road Initiative.[15] State-owned banks are important sources of funding for port construction.[16]
SOEs that compete in the market are largely owned by provincial or sub-provincial governments.[17] A significant cluster of these SOEs are joint ventures with foreign companies in the automotive industry.[17]
In addition to their own operations, SOEs invest in private enterprises.[18] From the perspective of these private enterprises, this form of partial state ownership is helpful in obtaining financing from banks, particularly as prompts banks to require less collateral.[19] Sometimes in investing in private enterprises, SOEs acquire enough shares to nationalize them.[20] Over the period 2018–2020, 109 publicly traded enterprises with more than $100 billion in collective total assets were nationalized in this way.[20]
SOEs help stabilize public finance, including through allowing the government to use assets as collateral to issue debt or to sell shares to balance budgets.[21] According to academic Wendy Leutert, China's SOEs, "...contribute to central and local governments revenues through dividends and taxes, support urban employment, keep key input prices low, channel capital towards targeted industries and technologies, support sub-national redistribution to poorer interior and western provinces, and aid the state's response to natural disasters, financial crises and social instability."[22]