Briefing on Chinese Central SOEs’ Participation
in Jointly Building “the Belt and Road”
May 8, 2017
State-owned Assets Supervision and Administration
Commission of the State Council, PRC (SASAC)
I. Review of Central SOEs’ International Operation
The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) supervises 102 central SOEs, which operate mainly in industries such as power, petroleum and petrochemicals, transportation, mechanical manufacturing, construction, communications, etc.. By the end of 2016, the total assets and net assets of central SOEs registered 50.5 trillion yuan and 16.9 trillion yuan respectively. In 2016, central SOEs realized a revenue of 23.4 trillion yuan and total profits of 1.2 trillion yuan.
In recent years, central SOEs actively adapt to the trend of globalization, make great efforts to promote their international operation, and positively participate in international cooperation. As a result, they have scaled up operation and enhanced overall strength continuously. So far, central SOEs have invested and established 9112 units overseas in 185 countries and regions. Since the 12th Five-Year Plan, central SOEs have seen average annual growth of 15% in overseas total assets and 4% in revenue. Their overseas investment accounts for 70% of China’s non-financial outbound foreign direct investment (FDI), and central SOEs’ contracting foreign projects revenue accounts for 60% of China’s total revenue in this area. Central SOEs have expanded their overseas businesses from project contracting and energy and resources development to high-speed railways, nuclear power, telecommunications, power grid construction and operation, etc.. In 2016, 50 central SOEs ranked among the Fortune Global 500, among which the State Grid Corporation of China (State Grid), China National Petroleum Corporation (CNPC) and China Petrochemical Corporation (Sinopec Group) ranked 2nd, 3rd, and 4th respectively.
II. Chinese Central SOEs’ Participation in Building “the Belt and Road”
SASAC has been earnestly implementing “the Belt and Road Initiative” since it was put forward by President Xi Jinping, with a series of measures taken to guide and promote central SOEs to participate in building “the Belt and Road” actively. Central SOEs took quick actions to prioritize the countries along “the Belt and Road” in their overseas operation expansion, give full play to their advantages and participate actively in constructing major projects. With efforts made over the past three years, central SOEs have seen great progress and concrete fruits in participating in the building of “the Belt and Road”.
First, promoting the infrastructure construction and raising the level of connectivity of the countries along “the Belt and Road”. The Central SOEs have given full play to their experience and advantages in infrastructure construction, participated actively in constructing major projects and greatly promoted the close ties and coordinated development among the countries along “the Belt and Road”. In terms of railway, the Ethiopia-Djibouti Railway (from Ethiopia to Djibouti) has been put into operation, the Mombasa-Nairobi Railway (from Mombasa to Nairobi in Kenya) is scheduled to open to traffic, the China-Laos Railway (from China to Laos) is under construction, and the China-Thailand Railway (from China to Thailand) and other railway projects are being accelerated. Among them, the “going global” of high-speed railway has witnessed prominent achievements. Projects such as the Jakarta-Bandung High-Speed Railway in Indonesia (from Jakarta to Bandung) have become bright business cards in building “the Belt and Road”.
In terms of highway, the China-Pakistan Karakoram Highway and other highway projects have improved local transportation significantly. They have revitalized local tourism resources, fostered new industries such as retail and gem mining and strongly promoted the improvement of producing and living conditions of local people. In terms of telecommunications, a comprehensive and integrated telecommunications network system is being created by building huge-capacity and high-speed telecommunications infrastructure such as cross-border submarine and land cables in neighboring regions including Northeast Asia, Central Asia, South Asia and Southeast Asia. China Mobile is engaging in strengthening the construction of basic network in Pakistan and took the initiative to launch 4G wireless broadband service there, which has strongly facilitated rapid development of local information industry.
Second, deepening energy and resources cooperation and driving the rapid economic growth of the countries along “the Belt and Road”. According to the needs of the national economic development of the countries along “the Belt and Road”, central SOEs have carried out more than 60 oil and gas projects in over 20 countries. They have strengthened technical exchanges and sharing in participating in mineral resources development, which has effectively enhanced their capacity and level of energy and mineral resources development. The Sino-Russian, Sino-Kazakhstan, and Sino-Burmese crude oil pipelines, and the Sino-Russian, Central Asia and Sino-Burmese gas pipelines constructed by CNPC have effectively addressed the difficulties in exporting oil and gas resources. Many projects have made important contributions to local economic development, such as the 10 transmission lines built by the State Grid in Russia and neighboring countries, the China-Pakistan Economic Corridor key power projects built by China Three Gorges Corporation, Power Construction Corporation of China (Power China), and China National Nuclear Corporation (CNNC), and the Edra power project built by China General Nuclear Power Corporation (CGN).
Third, strengthening industrial investments and building of industrial parks, and promoting the countries along “the Belt and Road” to achieve mutually beneficial and win-win results. Based on the industrial development of the countries along “the Belt and Road”, Chinese central SOEs have invested more in these countries, strengthened international production capacity and equipment manufacturing cooperation with them and promoted with great efforts to upgrade and transform their national economy. They have successfully carried out many industrial and manufacturing projects in Malaysia, Laos, Mongolia, Indonesia and other countries, and effectively met the needs of local economic development. Projects invested and operated by central SOEs, such as the Piraeus Port in Greek and Hambantota Port in Sri Lanka, have made positive contributions to enhancing the operation level of local ports and promoting economic and trade development. Important progress has been made in the China-Belarus Industrial Park, whose construction is led by China National Machinery Industry Corporation (Sinomach) and China Merchants Group (CMG).
III. Central SOEs’ fulfillment of social responsibility overseas
When building “the Belt and Road”, central SOEs have been observing laws and regulations with strictness and operating with integrity. They insist on localization, attach great importance to eco-environment protection and actively engage in public welfare undertakings, playing a positive role in improving local livelihood, promoting coordinated development, enhancing cultural exchanges, etc..
First, effectively promoting local employment growth. At present, 85% of 384,000 central SOEs’ employees in overseas branches are natives. Some branches have over 90% native employees, while PetroChina International (Indonesia) and China Mobile Pakistan (CMPak) have as high as 99%. Apart from creating jobs directly for local people, central SOEs have created jobs indirectly by tens of times, or even dozens of times. Central SOEs have paid great attention to enhancing technique and skills training for local staff to improve their working abilities and professional skills continuously. About 160,000 local professional technicians have been trained by China Railway Group Limited (CRE), China Railway Construction Corporation Limited (CRCC) and other central SOEs during joint construction of railways and roads with African countries. With support from Chinese colleges and universities, China Communications Construction Company Limited (CCCC) has trained a large number of high-level professionals by helping local employees to have further study in China.
Second, emphasizing the protection of local ecological environment. Central SOEs strictly abide by international codes of conducts and local laws and regulations on environmental protection. They intensified their efforts in protecting the environment by third-party evaluation, energy conservation and emission reduction, waste management, etc.. When exploiting mineral resources, a number of enterprises run the idea of green development throughout the process of their production and operation, minimizing negative environmental impact caused by the exploitation of mines through adopting stricter environmental standards and advanced technology.
Third, actively engaging in the cause of public welfare. In areas where their projects locate, central SOEs actively engage in service facility construction in sectors such as education, culture and healthcare to benefit local people. Sinopec’s public welfare project Addax Foundation aims to organize healthcare, education and environmental protection activities in developing countries and regions, which has benefited Zambia, Uganda, Nigeria and other countries. Power China’s institutions in Kariba and Itezhi provided disaster response and relief by repairing local roads, searching for shipwrecks, dealing with car accidents, etc.. China Metallurgical Group Corporation (MCC) had financed and built hospitals and schools in areas where their projects locate to address issues of healthcare and education and won applause from local communities and residents.
Central SOEs’ participation in building “the Belt and Road” has greatly upgraded the infrastructure in the countries along “the Belt and Road”, boosted local employment, improved living environment and promoted economic growth. Besides, it has accelerated the internationalization process of central SOEs. By deepening cooperation with the countries along “the Belt and Road”, central SOEs have become more experienced, capable and competent in international operation. Central SOEs’ participation in building “the Belt and Road” has given local goods access to China and the world as a whole. The commercial intercourse, flow of factors as well as cultural and educational exchanges have strongly promoted the globalization process.
In the next step, SASAC will continue to promote central SOEs to further participate in the building of “the Belt and Road”, which should be jointly built with consultation to meet the interests of all, deepen communication and cooperation with the countries along “the Belt and Road” in sectors such as equipment, technology, standards and management to advocate peace and cooperation, openness and inclusiveness, and mutual benefit, to make efforts to build a community of shared destiny and interests, and contribute more to the sustainable development of the global economy.