China planning massive innovation for state-operated companies

China’s Communist Party has launched one of the most ambitious private equity funds, focused on restructuring and reforming the party’s State-owned enterprises (SOE).

The party is looking to spend 350 billion yuan ($52.5 billion) on the reform project, which will be used to pay for mergers, acquisitions, industrial upgrades, and “innovation.”

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China’s government owns most of the critical infrastructure in the country, like mobile networks, electricity, and utilities. Some of the SOEs are public, but all of the voting shares are kept by the party.

The intention of the reforms is to make the SOEs more efficient and push companies founded in China onto the world stage. In the past few years, reports have shown gross negligence from the Communist Party’s SOE, which has led to Xi Jinping’s government pushing the reforms. The lack of world stage presence from apps and companies is also worrying for China, especially as the country starts to slow down.

Take Tencent’s WeChat, a ubiquitous service in China that provides a messenger, payment, and gaming platform all in one app, but has hardly any market control outside of its home country.

Alibaba’s Tmall is another example of China’s rather exclusive style, providing services tailored to the Chinese market that don’t work (or don’t want to work) in other countries.

How welcome will it be elsewhere?

China might not find a warm reception outside its borders, considering Western services like Facebook and Google have been forced out the country by the Communist Party. That said, Chinese developers are starting to show they can meld with other cultures, the most recent example being the new Musical.ly app.

Making state enterprises more efficient may improve the bottom line for the Chinese party, giving them more money to spend on innovative projects like a Mars mission and satellite launches. The party may also redistribute it into the private sector, providing a larger cushion for Chinese entrepreneurs with global ambitions.

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