Shuli Ren is a Bloomberg Gadfly columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.

Beijing is again showing Hong Kong who's boss.

Since 2016, at least 32 Chinese government-backed companies listed in Hong Kong have proposed installing Communist Party committees to advise their boards of directors, the Wall Street Journal reported Monday. The move is seen as significant because it's an explicit attempt to codify that the interests of the state rank above those of other shareholders.

Investors shouldn't be perturbed by this news, however: It may be a prelude to a multi-billion-dollar windfall.

Corporate governance has always been a weak spot at state-owned enterprises. Two years ago, Beijing arbitrarily switched the top bosses at China Unicom Hong Kong Ltd. and China Telecom Corp., reversing the fortunes of shareholders. Authorities have also placed shipping firms in trading halts for several months at a time while they deliberate over potential mergers as global conditions sour.

It won't come as a surprise to anyone that Beijing's presence is felt daily in Hong Kong. There are about 75 state-backed companies listed in the city with a combined value of more than $1.4 trillion, or around 30 percent of the market, Gadfly calculations from Bloomberg data show.

Quite often, the bosses of these companies have been idling, worried that too much entrepreneurial behavior could mean being swept up in President Xi Jinping's anti-corruption drive. Perhaps injecting Communist Party members at an operational level is therefore good news. At least management may feel any major decisions have the requisite stamp of state approval.

Beijing looks poised to miss its deficit target again in 2017
Source: Bloomberg

It could also be a boon for minority shareholders.

Since the global financial crisis, Beijing has been spending big to keep China's economy afloat. Government debt has ballooned to 38 percent of GDP from 22 percent in 2009, and China's 2017 fiscal deficit looks to be running well north of its stated 3 percent target.

SOE profits, meanwhile, have surged.

In the Money
China's state-owned enterprises are seeing their highest profit growth this year since 2011
Source: Ministry of Finance, Bloomberg

Time then for state firms to dole out some more cash.

As I wrote on Monday, investors should watch out for more special dividends this earnings season. China Mobile Ltd.'s first extra payout since 2008 to mark the 20th anniversary of its listing could well be a precursor.

The SOEs that are publicly traded in Hong Kong are in much better shape than their mainland counterparts. On a market-weighted basis, the 75 have an average earnings yield of 8.9 percent over the past 12 months, and a dividend yield of 3 percent.

These firms could easily afford to raise their payouts by 10 percent, which would be an additional $4.3 billion or so back to investors. National service indeed.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shuli Ren in Hong Kong at

To contact the editor responsible for this story:
Katrina Nicholas at