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China's cash-strapped companies sell stakes to local governments

Pressure from trade war pushes listed corporations into state control

Chinese Communist Party delegates raise their hands at the party's National Congress in November 2017. Local governments in China are strengthening control over private sector companies.   © Reuters

BEIJING/SHANGHAI -- More than 50 companies listed on the Shanghai and Shenzhen stock exchanges have received investment from Chinese local governments this year, pushing government-affiliated companies into top shareholder positions in half of these cases.

The aim is to extend a helping hand to companies in financial straits from the U.S.-China trade war and President Xi Jinping's deleveraging campaign. But the trend of local governments snapping up private-sector companies symbolizes the return of a worrying phenomenon, often described as guo jin min tui, meaning "the state advances, the private sector retreats."

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