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Reforms raise China state firms’ returns

For the past 30 years, China has been on a prolific journey of growth to become the world’s second-largest economy that it is today. It is worth noting, however, that behind this immense growth are numerous parastatals or state-owned enterprises (SOEs) that are the backbone of the East Asian nation’s economy to date.

China has more than 150,000 SOEs across all sectors of the economy ranging from security, transport, energy and finance, to infrastructure and manufacturing. These companies are managed right from the state-level down to the grassroots.

But like any other country including Kenya, China has had its fair of challenges with SOEs that have proved inefficient and loss-making machines, leading to strict guidelines that have seen most SOEs merged according to function, among other reform measures.

These drastic initiatives have been spelled out under the now world-famous ‘Supply-side reforms’ that are set to see 1.8 million people in the coal and steel industries lose their jobs. But these challenges are a pale shadow to the success and profitability of Chinese SOEs.

During my stay here so far, it took some getting used to every time we visited one successful company or the other and discovering that the company is state-run. One that has caught my eye is the Commercial Aircraft of China (Comac). Comac, which is based in Shanghai, was founded in 2008 to realise China’s dream of becoming a key player in the manufacture of large passenger aircraft.

Today, Comac is doing exactly that, after it launched China’s first large passenger jetliner C919 late last year. The pioneer jetliner has 168 seats and is aimed at competing with other single-aisle jets such as the Airbus 320 and Boeing 737.

“This programme plays an important role in building an innovation-oriented country and a comprehensive, well-off society in achieving the rejuvenation of China and the China Dream,’’ says Comac chairman Jin Zhuanglong, underscoring the importance placed on the organisation by the government.

Another such organisation is car-maker Beijing Automotive Industry Holding Company, Baic. Established in 2011, Baic produces an average 150,000 vehicles per year and projects to open its first African manufacturing plant in South Africa in 2018.

Both companies rake in billions of dollars per year in revenue for the government. It is worth noting that SOEs in China are successful mostly because they enjoy government support in funding, tax relief and subsidies, favourable business environment and policy support.

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