Mixed ownership will unlock opportunities for overseas enterprises to enter key industries

China has been pressing ahead with plans to expand mixed ownership of state-owned enterprises to boost economic efficiency. This is expected to produce unprecedented opportunities for foreign companies.

Last year, the government identified two SOEs for reform: China National Building Material Group and China National Pharmaceutical Group Corp.

In the long run, roughly 50 percent of China's SOEs could be opened for mixed ownership, according to Zhou Fangsheng, deputy director of the China Enterprise Reform and Development Society, a body under the State Council's State-owned Assets Supervision and Administration Commission.

Mixed ownership would mean that large SOEs, which have traditionally held monopolies in many strategic industries, could form joint ventures using private capital.

Zhou says sources of non-state capital include domestic private investors, foreign investors, and SOE employees. He adds that SOEs at both central and local levels offer opportunities for foreign investors.

The commission covers 113 non-financial central SOEs and 98,554 local government-owned companies. Central enterprises controlled about 53 percent of all SOE assets by the end of last year, totalling 91 trillion yuan ($14.63 trillion), according to the Ministry of Finance.

Mixed ownership would provide an opportunity for foreign enterprises to enter some industries blocked to private investors, Zhou says.

"It's possible that foreign capital could become the largest shareholder of an SOE through mixed ownership reform, but don't expect it to become a majority shareholder," he says. "Allowing state capital, non-state capital and employees to each hold one-third of the shares is a suitable proportion for the next step in mixed ownership reform."