Mixed Ownership Enterprises in China

Mixed-ownership enterprises are a type of state-owned enterprise (SOE) with diversified non-state shareholders. They exist for the purposes of improving SOE corporate governance and efficiency.

Mixed-ownership reform (MOR), the process through which a SOE becomes a mixed-ownership enterprise, should not be confused with privatization. Unlike privatization, government entities retain shares and voting rights rather than fully retreating from SOE management.


Becoming a Mixed-ownership Enterprise

As of yet, entities are not founded as mixed-ownership enterprises but instead are granted permission to have non-government shareholders by the State-owned Assets Supervisory and Control Commission.

Once permission is granted, SOEs can become mixed-owned through initial public offerings (IPOs) on China’s stock exchanges. Outside of IPOs, employee stock ownership is also categorized as a form of MOR.

For more on types of shares in Chinese entities and how to identify government shares in SOEs, please see our related article on share types in China.


Implications for Shareholder Control

Despite the intention of MOR, private control within SOEs tends to be highly limited. While there is no regulatory ceiling for private share percentage stakes, generally government entities still hold the controlling stakes in mixed-ownership enterprises.

These proportions may change in the near future. In May 2020, the State-owned Assets Supervisory and Control Commission released a statement announcing intentions to increase the proportion of private shareholders in mixed-ownership enterprises, and decrease the level of government control and influence of SOE corporate governance. This was followed in October by a guiding opinion co-signed by six government entities, including the National Development and Reform Commission and the Ministry of Finance, which encouraged greater MOR (though it did not list specific targets or policies).

Until new policies are put into place, one should presume that mixed-ownership enterprises are SOEs primarily governed by government shareholders.

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