China’s Online Giants Back $12 Billion Deal to Shake Up State Firm

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In the case of China Unicom, the country’s three biggest internet companies are investing: Alibaba Group, the e-commerce giant; Tencent Holdings, which runs China’s most popular social-messaging service; and Baidu, the online search company that is sometimes called the Google of China. The biggest new shareholder would be China Life Insurance, a state-run firm, which would have about a 10 percent stake, China Unicom said.

So far, experts say, the pace of corporate reform across China’s state-owned enterprises has been slow. Some state-run companies, such as Sinopec, an oil giant, have sold stakes in parts of their operations. But many of the buyers have been other state-controlled firms, known as S.O.E.s, and while the Chinese government has encouraged deals in power and shipbuilding, they have been slow in coming.

“There is an immediate, serious problem with this initiative in that the best outcome is more competition, not cooperation” between state companies and private firms, said Derek Scissors, a China-focused resident scholar at the American Enterprise Institute, a conservative think tank in Washington.

“It still could be an improvement over the current situation, if private firms are permitted to genuinely change S.O.E. practices,” Mr. Scissors said. He added, however, “There’s been no evidence of this yet.”

With or without deals, Beijing remains firmly in control of its biggest state-owned enterprises — and has even moved recently to make that control more clear. Last year Xi Jinping, China’s president, told the chiefs of state-owned enterprises that the Communist Party had final say in how they operate.

A number of state-owned companies, including big players in the energy and railroad industries, have also said in filings this year that Communist Party committees will play a major role in corporate leadership. The new language essentially formalizes — and underscores — what most investors and executives already assumed to be the case.

“It seems for the last two-and-a-half years the tide has been moving toward state capital at the expense of private capital,” said Arthur Kroeber, a partner at Gavekal, a research firm. “That’s not very encouraging.”

Still, China Unicom’s deal has the potential to be different because some successful private companies are involved, Mr. Kroeber said.

“This can be fairly interpreted as a signal that there’s a fairly serious effort to restart this mixed ownership reform in more or less the format that was originally planned,” he said.

China’s technology firms have quickly outmaneuvered state-run telecom businesses, with social-messaging apps that replaced text messaging and by building their own e-commerce networks. While state-owned firms have built the highways, private companies have learned how to go the fastest.

On the other hand, Chinese internet companies have good reason to team with a strategic partner like China Unicom. The internet giants have built businesses that have left behind state-run companies, along with their politically connected allies. Domestic internet regulators have increased scrutiny of online platforms, a move commonly considered official desire to keep order ahead of an important Communist Party meeting expected in late autumn. China Unicom is the country’s No. 2 cellphone service provider, after state-run China Mobile.

Martin Lau, president of Tencent, told investors on an earnings call on Wednesday that the deal represents a “monumental step” in China’s economic overhaul effort, and added that Tencent does not expect the deal to result in more regulatory pressure on the company. An Alibaba spokesman did not immediately respond to a request for comment.

Other companies involved include JD.com, which like Tencent is an Alibaba rival, suggesting the new shareholders may not always have the same agenda.

Under Wednesday’s deal, the company that is China Unicom’s immediate shareholder will sell new and existing shares to the new owners. The largest shareholder of that company will remain China United Network Communications Group, China Unicom’s state-controlled ultimate parent.

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