黑猫白猫, 能捉到老鼠就是好猫 (black cat, white cat; if it can catch rats, that’s a good cat).
China has a long history of flying policy kites, especially in the area of financial reform, and it sent another up last year directed at SOEs using the weakest listed telecom provider China Unicom as its subject.
Following an announcement in June (170622 Reuters Coverage) clarity was provided in August (170816 Company Announcement) and, in a nutshell, the new ‘reform’ goes something like this: SOEs are a problem, they’re self-ruling feifs the government can’t/won’t bring to heel so? Round up a bunch of ‘private’ companies, in this case from the thrusting white-heat of the new economy, get them to invest and take an interest in control and, just perhaps, presto! Problem(s) solved?
In this case Tencent, Baidu, Jingdog (JD.Com), Alibaba and others were persuaded to part with Rmb62bn (U$8.9bn) for a 35% stake in the A-share’s of China Unicom ‘..so as to further enhance the core competiveness [Their typ0] of Unicom A Share Company and speed up its strategic transformation.’
The paper this week from JiangYu Wang of the National University of Singapore’s Faculty of Law (a tight six-pager) highlights the extra-legality of this move which was in contravention of securities law and wonders where this is going and what the Party are trying to achieve? These are especially pertinent questions in the context of the Party seeking a greater say in recent years in the day-to-day decision making of Chinese corporations.
It’d be foolish to analyze this over a short period but it’s worth noting profits at Unicom (the H-share company) in 2017 rose 130% and for the half year to June 2018 they were up 90% driven, according to the company, in large part as ‘Mixed-ownership reform started delivering notable enhancement in growth momentum, quality and efficiency’.
The jury may be out but if improvement persists what are Beijing’s policy wonks likely to conclude, based on this example, about the efficacy of their new initiative? That it’s a jolly effective cat most likely.
You can access the paper via this link Mixed Ownership Reform.
Happy Saturday.