With the government's drive for mixed ownership, analysts expect more SOEs will follow suit and open up to private capital.

Private firms are eagerly waiting to cash in on the opportunity.

Wang Junjin, Board Chairman of JuneYao Group, a Shanghai-based private firm, said SOEs and private firms need each other.

"SOEs and private firms are vastly different. The former have more talent and are more organized while the latter are more flexible and can make quick decisions when facing market turbulence. By mixing them, SOEs will be stronger and more flexible and private firms will have more investment opportunities."

There are lots of opportunities in this regard for private firms. Whether or not they can seize this opportunity depends on their ability and adopting a proper mindset, Wang said.

Zan Shengda, President of Zongyi Co. Ltd., a private firm based in east China's Jiangsu Province, said that springtime for private companies has finally arrived with the government's drive to build a mixed-ownership economy. "In 2002, I said that springtime for private companies had come. However, it hadn't yet arrived. Private companies faced many difficulties and obstacles in getting funds and attaining resources and market access. Such an unfair market environment has suppressed Chinese entrepreneurs and compromised their dreams."

"SOEs are like the eldest son of the country, being more favored. But it doesn't mean other sons shouldn't be equally loved. China should accelerate the development of mixed-ownership economy to give private capital more room," said Zan.

Concerns

The move to encourage diversified shareholding in SOEs is not without controversy, however.

Zong Qinghou, Board Chairman of Chinese beverage giant Wahaha, voiced his concerns on this topic during the just concluded NPC annual session.

"Private firms are not allowed to have a controlling stake in SOEs. Therefore, they don't have a say in major decisions. Eventually, SOEs would swallow private capitals," Zong told Beijing Review.

Another concern is that, previously, SOE leaders were appointed by the CPC, which is not in line with modern managing principles.

SASAC Vice Chairman Huang said administrative appointment will be phased out in SOEs that have diversified ownership and senior managers will be hired and managed by the board.

Chen Xuyuan, Board Chairman of Shanghai International Port (Group) Co. Ltd., a listed SOE, said his company had long ago canceled administrative appointment and given the board responsibility for managing the company.

"Diversifying ownership in SOEs aims at building a market-oriented corporate governance system," Chen told Beijing Review. "It doesn't matter whether the capital is state-owned or private. What matters is only how competitive the capital is."

Zhang Chuanwei, Board Chairman of China Ming Yang Wind Power Group Ltd. said SOEs and private companies should have rights to earnings and voting in proportion to their amount of investment. "SOEs shouldn't have any privilege over other investors."

Liu Yonghao, Board Chairman of the Sichuan-based New Hope Group, said mixed-ownership in SOEs should be combined with a modern corporate governance structure to ensure opinions from all shareholders are heard. "In that way, the mixed company is more nimble, more adaptive to the market and more competitive. Otherwise, a simple mix will not be capable of bringing out the advantages from the two types of ownership."

On the flip side, some worry this round of SOE reform could engender corruption.

Chinese President Xi Jinping said developing a mixed-ownership economy represents an inevitable future trend. "The basic policy has been set forth. But the details haven't. The key lies in the details. Lessons must be learned from previous experiences. SOE reform should never become a chance for some people to embezzle state assets."

For Huang, protection of state assets should be strengthened as much as the protection of private capital.

"Private companies worried about being swallowed but SOEs are equally worried about embezzlement."

In the 1990s, when China rolled out SOE reform, a large amount of state assets were embezzled by some corrupt SOE leaders.

"China should learn from the past," said Huang. "We should be bold in mind and cautious in actions."

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