Revolutionary SOE reform taking place
Forex News

Revolutionary SOE reform taking place

An encouraging article in The Global Times writes, “Despite China-US trade tensions and some new skepticism about the direction of China’s reforms, state-owned enterprises (SOEs) are set to change radically. A new large-scale reorganization is about to begin, and it could revolutionize the efficiency of the sector and boost overall national growth.”

Key notes

  • The recent economic slowdown has led to debates on whether China can continue its economic growth or if the country is heading toward stagflation.
  • One thing which seems obvious is that China is currently facing more domestic and global challenges than it has at any other time in the past 40 years. 
  • Deepening the reform of SOEs is a clear signal that the Chinese government is dedicated to the improvement of its market economy.
  • Such a magnitude will facilitate major socioeconomic transformation and drive change in the industrial competitive landscape.
  • Productivity adjustments at many large companies over a short period of time will have a very positive impact on economic growth and the improvement of the economic environment.
  • China’s economic reform has been cautiously advancing in a gradual, long-term trial-and-error process. 
  • We welcome the MOR initiative, and believe it is one of the most important reforms to safeguard the balance and dynamic of the market economy, the efficient allocation of resources and fair opportunities for private and foreign investors.
  • The stock market reaction reflects the general belief that MOR could unleash the enormous potential of SOEs. 
  • Many international investors have enjoyed successful investments in the course of Chinese SOE reform. Now, a new and bigger opportunity awaits China and the world.

FX implications

This is risk-positive and could well be a theme for markets in time. First and foremost, however, it all depends on how well the US and China play ball in 2020. 

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