Expansion of Central SOEs Causes Concern

Many of China's provincial governments have been enthusiastic about getting investments from the country's most powerful enterprises to spur development of their local areas.

Local officials have signed agreements with companies controlled by the central government, adding up to trillions of yuan.

These mega contracts have triggered concerns among both economists and economic regulators.

Wu Jia takes a closer look.

At the latest signing ceremony in Beijing, representatives from Henan Province signed more than one hundred agreements with enterprises controlled by the central government. The contracts are worth some 300 billion yuan or more than 40 billion US dollars in total.

These projects involve scores of state-owned enterprises, including China Mobile, a giant in the telecom industry.

Wang Jianzhou, Chairman of the company's Board of Directors, reveals that China Mobile's investment in Henan will reach 20 billion yuan over the next three years.

"We are planning to install new equipment in Henan to build a call center and an internet data center."

Shi Jichun, Deputy Governor of Henan Province, explains the motives behind the cooperation.

"Our cooperation with the state-owned enterprises can benefit local economic development in terms of upgrading our industries and introducing new economic growth patterns."

During the past year, similar motives have driven a dozen provincial governments to send delegations to Beijing, where they scramble for the favor of state-owned enterprises.

So far, the total value of agreements signed between them has amounted to more than six trillion yuan.

However, Dong Yuping, an economic researcher with the Chinese Academy of Social Sciences, says he's concerned about the negative impact of the massive expansion of state-owned enterprises.

"The state-owned enterprises have been holding sway in sectors concerning national economic security, however they still want to engage in other sectors where they compete with private enterprises. This surely puts the private operators at a disadvantage. Meanwhile, I don't think those multi-billion agreements will necessarily bring about the intended benefits to local governments."

The country's top regulator of state-owned enterprises has expressed similar concerns.

Wang Yong is Chairman of the State-Owned Assets Supervision and Administration Commission.

"The companies' cooperation with local governments should not deviate from their core businesses. They should adjust their own structures to become stronger in that area, instead of blindly expanding in size and quantity."

Chinese enterprises are basically divided into two categories: state-owned and private. The central government directly controls more than 100 of the powerful state-owned companies. These elite enterprises control the nerve centers of the national economy, like oil industries, telecommunications and power generation.

For CRI, I'm Wu Jia.