China's 6.9 trillion yuan makeover of state-owned enterprises attracts sceptics

Shanghai

TO GRASP the scale of the challenges facing Chinese leaders in revamping their sprawling and inefficient state-owned enterprises (SOEs), consider this: the combined revenue of 100-plus government-owned firms, spanning from train makers to banks and power companies, rivals Japan's entire US$4.1 trillion economy.

China's SOE sector, traditionally a source of political patronage and economic power for the Communist Party, accounts for about 40 per cent of China's industrial assets and 18 per cent of total employment, according to Bloomberg Intelligence (BI) economists Fielding Chen and Tom Orlik. These government creations are also dragging down growth, with their return on assets in 2015 estimated to be at 2.8 per cent, versus 10.6 per cent for private sector-firms.