By Fran Wang
(Beijing) – China plans to help “qualified” companies in the country’s northeast to list on stock exchanges, the government said Wednesday, as part of a raft of supporting policies for the troubled area that was once the country’s industrial powerbase.
The three provinces of Liaoning, Jilin and Heilongjiang in China’s northeast, which once formed the country’s industrial heartland and are home to a concentration of state-owned enterprises (SOEs) involved in steel, mining and other heavy industries, are now facing mass layoffs and bankruptcies.
But these companies have become a thorny issue for China’s leaders as the government tries to reform the hugely inefficient public sector and reduce manufacturing overcapacity, partly because of the massive workforce SOEs employ.
The State Council, China’s cabinet, in a far-reaching policy announcement said that it would step up fiscal and financial backing for companies in the region, help traditional industries to upgrade and encourage key state projects to procure their products, and carry out trials of “mixed-ownership” of SOEs.
Authorities will give “prioritized support for qualified enterprises in the northeast area in their applications for initial public offerings and stock market listings”, it said in a statement. It did not clarify what criteria would be used to evaluate if a firm was “qualified.”
Banks will be encouraged to increase loans to the area, “satisfy the reasonable credit needs” for competitive firms, and “actively mitigate the cash crunch problem” of large- and medium-sized companies plagued by “temporary difficulties,” it said.
State stakes in some local SOEs would be sold to pay for “necessary reform costs” — usually a euphemism for expenses such as severance pay — and top up social insurance short falls, it added.
Stabilizing the economy in the northeast is “vital to balance regional development and maintain economic and social stability across the country,” it said.
In September, Heilongjiang Longmay Mining Holding Group Co. Ltd., the largest state-owned coal mining company in the northeast, announced it would cut 100,000 jobs over three months to reduce costs and improve efficiency.
In October, Liaoning’s Dongbei Special Steel Group, China’s largest specialty steel producer, entered bankruptcy after it missed billions of yuan in bond payments since March.