Companies
Shanghai SOEs may face shake up
By Wang Ying (China Daily)
Updated: 2010-07-20 10:12
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SHANGHAI - Two listed retailers under the Bailian Group Co suspended trading on Monday due to corporate restructuring, which may be a sign of things to come in Shanghai as State-owned enterprises look to improve efficiency and eliminate overlaps in redundant business units.
Shanghai Bailian Group Co Ltd and Shanghai Friendship Group Inc Co - both part of the Bailian Group - are slated for restructuring within the retail group. They were both suspended from trading on Monday in order to avoid large fluctuations in their share prices.
Apart from Bailian and Friendship, four other Shanghai's State-owned enterprises suspended trading prior to a reshuffle of capital assets within their groups on the Shanghai Stock Exchange on Monday, including property developers Shanghai Jinfeng Investment Co Ltd, China Enterprise Co Ltd, Shanghai Industrial Development Co Ltd and transportation provider Shanghai Qiangsheng Holding Co Ltd.
Shanghai Municipal State-owned Assets Supervision and Administration Commission, the direct governing body over 46 local State-owned companies, is planning a thorough reshuffle of the companies, said Liang Jinxiong, a strategic analyst with Dongguan Securities.
"During the great restructuring, less-competitive and labor-intensive companies will either be acquired or shut down, and Shanghai municipal government will downsize the number of State-owned companies involves from 79 to 54 within three years," said Liang.
Back in the 1970s and 80s, Shanghai brands were synonymous with premium quality and stylish designs. However, the city's brands took the back seat as more foreign brands made inroads into domestic markets along with some stellar brands emerging from the coastal provinces of Guangdong and Zhejiang.
"It's a real pity that Shanghai's companies missed out on the best timing for development during the bullish stock market due to the frequent changes in leadership, while their counterparts in other provinces seized on the opportunities and became market leaders," said Zeng Xiaoyong, analyst from Shanghai Securities.
"It is hard to imagine that the nation's financial center has had no outstanding property companies originate in the city," said Zeng.
According to Liang, Shanghai brands are resolute about making a comeback. The plan therefore is for companies with similar business models will be incorporated into larger ones and less profitable ones will be weeded out, said Liang.
In addition, Shanghai plans to raise local companies' securitization rate to above 30 percent in 2010 from 25.4 percent at the end of 2009, said Yang Guoxiong, director of the Shanghai Municipal State-owned Assets Supervision and Administration Commission.
Restructuring of local government-owned companies will surely attract more capital to focus on Shanghai-based companies, said Liang.
During a regular meeting of the local State-owned asset supervisor, Liu Xie, spokesperson for the governing body said three companies, including Shanghai Pharmaceutical Co Ltd, Shanghai Construction Co Ltd and Shanghai Jinjiang International Hotels Development Co Ltd, completed restructuring during the first half of this year.
It is estimated that more than a quarter of the 72 companies owned or indirectly controlled by the Shanghai municipal government completed restructuring in 2009.
From January to June, Shanghai State-owned enterprises generated 473.74 billion yuan in revenue, up 41.8 percent over the same period in 2009. These companies reported a net profit of 30.01 billion yuan, up 98 percent year-on-year.
Shares of the 201 Shanghai-listed companies surged 2.37 percent on Monday, led by Bright Dairy & Food Co Ltd, which soared to 8.23 yuan, reaching its daily limit of 10 percent.