China: State Firm Shake-Up As Worries Mount

China has confirmed it is to open up its vast empire of state-owned companies to private investors, as part of efforts to boost investment as credit dries up in its economy.
The official Xinhua news agency said that guidelines issued by the Communist Party's Central Committee and the State Council, China's cabinet, included plans to merge some state-owned enterprises (SOEs) and allow part-privatisations.
Xinhua said the government expected "decisive results" by 2020.
"The SOE system should be more modernised and market-oriented. It should make for higher economic vitality, higher control, greater influence and SOEs will be more risk-resistant."
China has more than 100 SOEs - many of them utilities, infrastructure and mining firms - with 25,000 more at a local government level, employing millions.
Companies such as China Mobile and the massive ICBC bank have remained in state hands because they are seen as crucial to national security.
The support from Beijing has meant SOEs have enjoyed preferential rates on loans but many are now suffering as the availability of credit dries up across the country - a core reason behind China's economic woes.
It is hoped that new investors can bring greater experience though many might be put off by the threat of state interference and the country's recent stock market crash.
There would also be huge pressure to maintain employment, as a big worry for the Chinese authorities is the prospect of social unrest arising from the economic slowdown.
Sheng Hong, director of the independent research group the Unirule Institute in Beijing, exercised caution on the reforms, saying they were "not meaningful" and failed to address critical issues including curtailing monopolies.
He told the AP news agency: "They have been only playing with words and don't intend to carry out real reform."
Credit conditions may be about to get further squeezed in China.
Stocks across Asia, including China, fell on Monday as investors continued to fret on whether the US Federal Reserve would start raising interest rates this week from their 2008 low.
Rising borrowing costs would exacerbate the loss of super-cheap money from quantitative easing - hitting not just China but wider emerging markets.
The latest factory output data from Beijing disappointed, growing by 6.1% in August, adding to worries about China's industrial activity after exports fell 5.5%.
The worse-than expected data - coupled with the prospect of rising US rates hitting credit availability and exchange rates - has left China at risk of missing its GDP growth forecast of 7% for this year.

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