Management Ownership of Shares in Reformed SOEs: SASAC Opinion
January 22nd, 2006
China’s State-owned Assets Supervision and Administration Commission (SASAC), Chaired by Li Rongrong, has promulgated a new regulation regarding share ownership by executives of state-owned enterprises undergoing reform. The new rules permit management to own shares but avoid privatization (and management buy-outs) by restricting that ownership, explicitly prohibiting management from becoming the dominant shareholder.
The regulations are blandly and vaguely titled something like “Implementing Opinion Concerning Further Standardization of the Work of State-owned Enterprise Reform (in Chinese, 关于进一步规范国有企业改制工作的实施意见 or Guanyu jinyibu guifan guoyou qiye gaizhi gongzuo de shishi yijian). The full text of the SASAC Implementing Opinion is available in Chinese here.
This Implementing Opinion was adopted by the State Council more than a month ago, on December 19, 2005. However, as pictured, a headline about the “new” rules dominates Xinhua’s website today. That headline links to this story about the Implementing Opinion.
Comments on the rules by a SASAC spokesperson are reported here.
SASAC is under the State Council (the rubric under which nearly all of the PRC’s vast collection of government agencies is put, currently headed by Premier Wen Jiabao). In Chinese SASAC is abbreviated as 国务院国资委 (Guowuyuan guo zi wei). The SASAC English web site is here.
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Update:
The English-language China Daily has a story about the new rules here.
This deeply misguided article on the People’s Daily English website (and attributed as “Source: Xinhua”) blares in a headline that “Management buyout (MBO) permitted in major China SOEs ,” but then it goes on to note:
Total shares held by the managerial staff should be less than the volume that could absolutely or relatively control the SOEs, according to a document issued by the State-owned Assets Supervision and Administration Commission (SASAC) and approved by the State Council.
MBOs can only exist if control changes hand; that’s the buy-out or BO part of MBO. Otherwise, the transaction is at most a management buy-in (an MBI?). Good reminder of the hazards of translation.