China Premier Calls for SOE Mergers, Disposal of ‘Zombie’ Firms

  • SOEs need to deepen reforms and focus on steady growth
  • Li's words follow guidelines released last week on SOE reforms

China’s Premier Li Keqiang is calling for state-owned enterprises to promote mergers and reorganizations to increase the efficiency of their operations, as the nation faces its slowest growth in 25 years.

State-owned enterprises need to deepen reforms with a focus on steady growth and increasing their competitiveness, Li said in a seminar which included senior officials on Friday. Officials from the State-owned Assets Supervision and Administration Commission and executives from companies including China Railway Construction Corp. were present, according to the statement.

The world’s second-largest economy is set to grow at its slowest pace in a quarter century this year even after five central bank interest rate cuts and fiscal stimulus. Li’s calls come amid an equity-market rout that’s wiped $5 trillion in value off the nation’s stocks and after a sudden move on Aug. 11 to change its exchange rate regime, a decision which triggered the yuan’s biggest depreciation in two decades and roiled global markets.

Li also urged state-owned enterprises to dispose of “zombie” companies and those suffering from long-term losses. To foster growth, Li said state-owned enterprises needed an innovation-driven development strategy and global collaboration.

China last week announced long-awaited guidelines to make its bloated state-owned enterprises more efficient as policy makers search for ways of reinvigorating its $10 trillion economy. The nation’s leaders had announced their intention to overhaul SOEs at a gathering in 2013 in a move aimed at eliminating waste and boosting their competitiveness.

— With assistance by Alexandra Ho

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