"For those not ready, we'll pursue their shareholding reform in other ways," said Wang Jian of the Shanghai State-owned Assets Supervision and Administration Commission.

Also addressing the news conference was Han Zheng, the Communist Party chief of Shanghai, who pointed out that the SOE reforms were to some extend a result of the poor performance of local SOEs.

According to data from the Ministry of Finance, locally owned SOEs across China reported an average decline in first-half profits of 10.6 percent. Profits of centrally owned SOEs increased 15.6 percent during that period.

The bonus that SOEs got from the previous round of reforms during the 1990s is nearly exhausted, Han said, and the SOEs are again facing a bottleneck in development.

"We do not yet have enough large enterprises, and we lack entrepreneurs who can think along global strategic lines," Han said, while urging SOEs to be innovative with management appointments to tackle these issues.

Public recruitment

He said that in the future, the government would only appoint three posts at SOEs: the Party chief, the chairman and the president. All other

positions would be filled via public recruitment.

"In some State-owned companies, even the president can be selected via market-oriented mechanisms," he added.

Shanghai will also establish a platform to facilitate the free flow of State assets, where all resources, assets and capital can be allocated according to demand to support SOE reform. Han said that one or two such platforms will open next year.

But Han denied rumors that these platforms would copy the Singapore model, which bundles State assets into a large management company such as Temasek Holdings.

"We have our own path to follow," he said.

As the second-largest base for State-owned assets after the central government, Shanghai's growth still largely depends on the State economy.

From 2008 to 2012, Shanghai's locally managed State assets expanded 17.4 percent annually. Those assets contributed more than one-fifth of the city's GDP and tax revenue.

Total assets under the management of Shanghai's SOEs exceed 10 trillion yuan. The SOEs also account for nearly half of the overseas assets under the management of domestic companies in Shanghai, totaling $46.7 billion.