Guangdong is looking to securitize up to 60 percent of its State-owned assets by the end of 2015, from 20 percent now. That leaves only two years for the local State asset regulator and other local authorities to work out a way to achieve that goal.

Finding a path

Lyu Yesheng, head of the local State asset supervisor, said reform of Guangdong province's 4 trillion yuan in national assets would focus on optimization of the asset allocation and a shift of focus from asset management to capital management.

Luo Zhongwei, a senior researcher with the Institute of Industrial Economics under the Chinese Academy of Social Sciences, said there's no ready-made experience for Shanghai to draw on.

"All of Singapore is the size of a city, so its experience, though successful on its territory, may not be applicable to a vast country like China.

"Shanghai must explore its own way, which would also set an example for other provinces," he said.

But he also warned about the risks of reform and the resistance it will encounter.

"The last round of SOE reform came to a standstill in 2003 because there was too much criticism of the loss of State assets, and that will undoubtedly become a key issue this time," Luo said.

SOEs need high-level capital management talent to resolve that issue, he said, but bringing in that kind of talent will lead to another issue: that of balancing the interests of different managers.

"The SASAC tried to introduce foreign managers at the SOEs in 2003, but they were mostly marginalized due to conflicts of culture and interest."

The idea of being thrown into a competitive market could be a challenge for some SOEs that have been sheltered like hothouse plants.

"Our profit margin is already below the industry average. It will become even harder for us if we are put into a purely competitive environment," said Cao Zhijie, vice-president of Shanghai Liangyou Group Ltd, the largest food corporation in Shanghai.