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China state arms maker pledges 'mixed ownership' reforms

Reuters

SHANGHAI (Reuters) - The China North Industries Group (Norinco), a central government-run arms manufacturer, has decided to pursue a "mixed ownership" model as part of China's ambitious reform program for state-owned enterprises (SOEs), the company said.

In a terse statement published on its official website on Wednesday, Norinco said it had "decided to actively and steadily promote the development of a mixed ownership economy" and would work to improve its corporate governance.

The statement appeared to open the prospect there could be some private investment in the arms maker or its subsidiaries, but it gave no details.

Norinco describes itself as a "backbone" for the development of weapons and military-use communications equipment in China. It had total assets of 336.8 billion yuan ($48.91 billion) and a total workforce of 276,600 by the end of 2015.

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At a top-level economic work conference held in December, Chinese leaders promised to make significant progress in introducing mixed ownership reforms in sectors like electricity, railways, telecommunications and the military industries.

The central government issued guidelines in 2015 aimed at boosting the performance of its SOEs. It said it would close down the most uncompetitive firms and reform the ownership structure of those that remained.

The reforms are expected to allow private capital to invest in SOEs, though restrictions are likely to remain in place in the sensitive military sector.

The State Council, China's cabinet, said in a document issued last July that central government-run SOEs in areas vital to the country's economy and security, including defense, power and communications infrastructure, would be fortified and strengthened.

China's massive but debt-ridden SOEs have been urged to transform themselves into "innovative and globally competitive world class multinationals" through management reforms and new ownership structures.

But while the government hopes state firms will eventually become more responsive to the market, the reforms have also been designed to make them better able to fulfil their "functional use" in important strategic sectors, including national defense.

President Xi Jinping has also repeatedly stressed that the reforms will strengthen the "leading role" the Chinese Communist Party plays in running SOEs.

(Reporting by David Stanway; Additional Reporting by Matthew Miller in BEIJING; Editing by Adrian Croft)

 
 
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