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China eyes industrial reform via heightened state control

Communist Party gaining more say in decisions at listed companies

BEIJING -- Chinese President Xi Jinping looks to tackle tough tasks such as fostering new industries and focusing the country's production on quality rather than quantity in his second term as Communist Party leader, but he appears intent on achieving the goal by turning back the clock and boosting the party's control over the industries.

During the party's National Congress, which ended Tuesday, Xi said he would accelerate reforms at state-run companies in order to turn them into competitive, first-class global players. The Communist Party of China has been increasing its control over state-owned enterprises under Xi's leadership.

Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission, proudly declared in a news conference late last month that all 98 "central" state-owned enterprises had adopted in their articles of incorporation a clause allowing extensive party involvement in management decisions.

These central companies are not listed on the stock market, but many of their subsidiaries are. At least 436, or one-eighth, of the companies listed in mainland China had amended their charters to explicitly permit party involvement in management as of Oct. 17, the day before the congress began, a Nikkei survey shows.

The Communist Party also is extending its influence over startups. Beijing Bikelock Technology, which operates the Ofo bike-sharing service, formed an internal party organization in July led by the company's chief.

The party has urged state-owned companies to make more overseas acquisitions so they can gain know-how and become world-class players. Chinese companies acquired or invested in 7,961 businesses from 164 countries last year, spending about $170 billion -- up 44% from 2015.

Yet China keeps a tight lid on foreign companies trying to enter the country's market. Internet-related businesses in particular have been effectively shut out, letting e-commerce company Alibaba Group Holding and online services provider Tencent Holdings grow into titans.

As China shifts from rapid growth to an economy more focused on quality, structural changes are needed, Xi said at the congress. But increased party involvement could hinder true structural change.

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