China's southern city of Shenzhen, a pioneer in the country's opening-up, has made another bold step in the reform of State-owned enterprises by selling company shares through international tender.
Five major State enterprises covering energy, water, gas, public transportation and food have been selected as the first batch to sell part of their stakes, Shenzhen Mayor Yu Youjun said at a press conference yesterday.
"This practice is a first try in China and we have strong support from the State Council," said Yu.
Foreigners will be invited to bid for minority stakes in the Shenzhen Energy Group, Shenzhen Water (Group), Shenzhen Gas Group and Shenzhen Public Transportation (Group) Ltd, Yu said.
The municipal government plans to sell 25 percent of Shenzhen Energy, 45 percent of Shenzhen Water, 24 percent of Shenzhen Gas and 45 percent of Shenzhen Public Transportation to foreign investors, he said.
A 14-percent stake in Shenzhen Gas will be sold to a domestic investor.
"As the four companies are in key industries where the government still imposes price controls on products, their controlling stakes will remain in the hands of the Chinese side," Yu told the conference.
But for the fifth company, the Shenzhen Food General Corp, stakes of 30 and 40 percent will be sold to two foreign companies, one of them holding a majority stake, Yu said.
Many Chinese State-owned enterprises need money to restructure and deal with increasing foreign competition as the country is opening up its economy after joining the World Trade Organization late last year.
As a result, these company shares will only be given to foreigners who can help add value to the assets and intend to cooperate for a long time, Yu said.
The city will begin to evaluate the firms' assets and select preliminary foreign candidates in August and September.
The final buyers and sales agreements will be decided in October and November.
The deals will be completed by the end of the year, Yu predicted.
Morgan Stanley-funded China International Capital Corp was appointed the lead adviser for the asset sales.
The five companies are highly profitable and will be attractive to foreign investors, Yu said.
Yu said the international tenders will operate on a trial basis.
"If it is successful, we will decide the names for the second batch next year and expand the circle based on the experience of this time," Yu said.
(China Daily August 29, 2002)
