REUTERS/China Daily Paramilitary policemen hold their fists in front of a flag of Communist Party of China as they attend an oath-taking rally.
According to the WSJ's sources inside the Chinese government, the changes are both about making the government's firms more business friendly and preparing them to list on stock exchanges, but also to consolidate the government's hold over them. It's no privatisation, and that's deliberate.
Here's the WSJ:
The leadership is determined to "crack a hard nut," said Li Jin, deputy head of the China Enterprise Reform and Development Society, a trade group under the top regulator of state firms.
Strategically important industries such as energy, resources and telecommunications are marked for consolidation, the officials and advisers say. The merged entities would then be reorganized as asset-investment firms, with a mandate to make sure they run more like commercial operations than arms of the government.
Upper management will be under orders to maximize returns and prepare many of the companies for eventual listing on stock markets, say these people.
China's economy is slowing down: GDP rose by 7.4% in 2014, the slowest in two decades, and the government's growth target has now been pushed even lower, to "around 7%".
So inefficiencies in management are more of a target than they previously were, with Beijing keen to avoid any more pain from the more modest economic growth than is necessary.
Here's the WSJ again:
State firms have thrived on access to loans from state banks and government-set rules that limit competition from private businesses, which complain of being muscled out of the market unfairly. Economists have said the special status has come at a cost to Chinese taxpayers and consumers.
In an analysis for The Wall Street Journal, economist Zhu Chaoping at UOB Kay Hian Holdings Ltd., a Singapore-based brokerage, found that assets at state-owned enterprises, defined as those majority-controlled by the government, jumped 90% to 25.1 trillion yuan ($4 trillion) in 2012 from 2008. Return on equity among state-controlled manufacturers, however, averaged 11.6% in 2013, compared with nearly 25.7% for their private brethren, according to Mr. Zhu's analysis.
China's debt challenges are also made much worse with lower growth, and the government is keen to get its SOEs to kick their ballooning corporate debt habit. Debts that are manageable when the economy's growing at 10% per year suddenly look a lot less reasonable when it's only growing at half that speed.