Shenzhen to Sell Off Government Assets

China News Digest, 17 February 2002

[CND, 02/17/02] Shenzhen's municipal government has developed a project to reduce its involvement in state-owned enterprises (SOEs) that are worth roughly 200 Billion yuan (HK$188.68 billion), despite Beijing's explicit instructions to halt the disposal of state holdings last October, the Hong Kong iMail reported.

Yang Jinjun, a municipal officer responsible for the restructuring of the economic system in Shenzhen's government, indicated that the project would begin very soon, involving all SOEs located within the special economic zone (SEZs) to date.

Guangzhou-based Yancheng reported that nearly all of the municipal government's SOEs were merged under the management of three key asset management firms: Shenzhen Municipal Investment Management Corporation (SMIMC), Shenzhen Construction Holdings and Shenzhen Commercial and Trade Holdings.

The SMIMC is the largest of the three firms, handling assets worth more than RMB$106 Billion. During the 4th Quarter of 2001, shares of the municipality's fully-controlled gas sector were transferred to the energy sector, involving yet another SOE as its investment management team. Unknown to many economic analysts, shares of the gas sector were acquired by companies in Hong Kong.

After the restructuring process of the gas sector, holdings fell from 100% to 49%, more than half of what was completely controlled by the government. Hong Kong & China Gas (Towngas) holds shares of 20%, China Petrochemicals holds shares of 4 percent and the municipality's energy sector maintains their investment holdings at 22%. Shenzhen's mayor Yu Youjun glorified the restructuring project as a successful example in the manner regarding the disposal of state assets.

Endlessly, the project continued to gain interest from investment firms around the globe. Among those involved were nine overseas energy firms, including Hong Kong's Huaneng Power International and a French entity, for the transfer of at least 49% of the 100% shares from the municipality's energy sector, transforming the municipality's energy group into a global venture worth nearly RMB$7 Billion. The final results of the changeover will be announced at the end of the first quarter of this year, sources report.

Yang Jinjun said that he is concerned by the No.69 circular issued by the State Power Corporation, which bans the sales of state holdings in the energy sector.

During the early third quarter of 2001, it was rumoured that the disposal of state ownership would lead to sharp declines in the Shanghai and Shenzhen stock exchanges. Although the sharp declines did in fact occur in these markets, it is uncertain if they are directly related to the acquisition of the municipality's holdings. (Yun NI)