The relocation of central state-owned enterprise headquarters out of Beijing has once again set off alarm bells across the country.

Whether driven by the need to relieve Beijing of non-capital functions or by considerations of balanced regional development, the state has now taken concrete action...

Amid this new national strategy and evolving development landscape, as second- and third-tier cities elevate their status, the time is ripe for them to vie for the relocation of SOE headquarters.

Which SOEs are in the second batch to relocate? No list has been released yet...

Judging from previous relocations, the primary motivations have generally been to be closer to markets, resources, and upstream and downstream segments of industrial chains.

However, after relocating out of Beijing, there remains the question of whether a phenomenon of “relocating externally but not internally” exists—where headquarters continue to perform their original functions and exercise their authority as central SOEs.

Alternatively, if these companies do not operate from secondary units but instead establish Beijing offices, might this spark a boom in “SOE Beijing offices”…

Raising the Curtain on the Exodus from Beijing

A meeting was held recently, during which a key point was raised:

To earnestly advance the implementation of all tasks related to the relocation of non-capital functions from Beijing, and to continue planning the relocation of the second batch of central SOE headquarters in Beijing, as well as their second- and third-tier subsidiaries or innovative business units.

This means that the second batch of central SOE headquarters in Beijing is about to begin their relocation to other cities.

In fact, this is not the first time this has been mentioned.

In recent years, Beijing has been actively promoting the relocation of non-core functions, particularly in coordination with the national strategy to relocate the headquarters of some central SOEs to other regions.

However, for various reasons, very few SOEs have actually left Beijing. Some believe the effort has been all talk and no action. Nevertheless, judging by past relocation records, significant progress has been made.

Looking back, where did the first batch of central SOE headquarters relocate to after leaving Beijing?

China State Shipbuilding Corporation, China Electric Equipment Group — Shanghai

China Huaneng Group, Sinochem Holdings — Xiongan, Hebei

China Three Gorges Corporation — Wuhan, Hubei

China Electronics Information Industry Group — Shenzhen, Guangdong

In addition, newly established SOEs have set up their headquarters in other cities.

For example, China Satellite Network Group and China Mineral Resources Group are both headquartered in Xiong’an, Hebei, while China Rare Earth Group is headquartered in Ganzhou, Jiangxi.

Currently, in terms of the distribution of SOE headquarters, 69 remain in Beijing.

The remaining provinces host only 29 SOEs, primarily in Shanghai, Guangdong, Hebei, Hubei, Sichuan, Jiangxi, Liaoning, Jilin, and Heilongjiang.

There are two fundamental reasons why SOE headquarters are concentrated in Beijing:

First, as these enterprises are largely funded and controlled by the State-owned Assets Supervision and Administration Commission (SASAC), their proximity to the central government allows for greater efficiency and direct communication with the central authorities.

Second, as the capital, Beijing enjoys abundant development resources, providing these enterprises with more opportunities for growth.

However, the concentration of a large number of SOEs in Beijing also presents numerous drawbacks.

The relocation of these enterprises from Beijing to other regions, while ostensibly aimed at alleviating traffic and environmental pressures, is in fact a market-oriented reform to “de-centralize” administrative functions and achieve balanced regional development.

To ensure the safe relocation and “settling in” of SOEs in various regions—and to better align with future development needs—local authorities must not proceed without thorough preparation.

In the past, most people believed that SOEs would relocate either to Shanghai or Shenzhen, or at most to the surrounding Tianjin and Hebei regions.

In reality, this is not the case. In the future, the primary destinations for major SOEs will not be limited to Tianjin and Hebei; sub-provincial cities and new districts with high concentrations of industries will also play a role, matching their capabilities to the specific types of SOEs. These regions possess a certain capacity to accommodate such relocations.

Lifting the Veil on the Relocation

Undoubtedly, the relocation of SOE headquarters—in addition to alleviating non-capital functions in Beijing—will also better leverage the role of SOEs in promoting economic development, driving the overall upgrading of regional industries, advancing economic restructuring and transformation, and fostering coordinated regional development.

Conversely, this is not merely about fulfilling a superficial task.

For example, some SOEs might retain a so-called “secondary unit” in their former Beijing headquarters building, even though the main operations have moved to the new location.

Furthermore, even if operations are not conducted at the secondary unit, establishing a Beijing office results in the retention of a “Beijing liaison office.”

In this way, the original intent of relocating SOE headquarters is “distorted,” and non-capital functions have not been fully alleviated.

Of course, this is merely one possibility.

After all, the vast majority of employees at SOE headquarters have long since settled down and established their careers in Beijing. Once a “Beijing office” is established, many will choose to stay and work there. When too many people remain, the “Beijing office” effectively becomes the SOE’s “second headquarters.”

Therefore, we must eliminate the phenomenon of “relocating externally but not internally, or relocating in name only but not in substance.”

Even if offices are established in Beijing, they must be business-oriented, operating under uniform systems and regulations issued by the State-owned Assets Supervision and Administration Commission (SASAC) for consistent implementation, rather than following a “one-size-fits-one” approach.

This is known as preventing problems before they arise; it is also a long-term management mechanism and a necessity for the construction of Party conduct and integrity.

Furthermore, the heads of central SOEs are not only corporate managers but also officials at the national level.

Great importance is placed on their sensitivity to policies and information, as well as the efficiency and convenience of their operations. Local governments should promptly eliminate policies that have expired or are unsuitable for regional development.

In terms of administrative approvals, a single chain binds central SOEs and local governments together. At the same time, under the principle of “loosening the ends and tightening the middle,” some approval authority is delegated, allowing enterprises to spend more time in the market and less effort dealing with government bureaucracy.

In line with the direction of institutional reform, a new system of open recruitment and appointment is being implemented, moving away from the outdated practice of appointment-based systems. Instead, a hiring and performance evaluation system is adopted to ensure the market-oriented principle of “flexible entry and exit” is fully realized.

At the same time, through open recruitment for specific positions and appointment based on job requirements, industry elites and professional talent are openly recruited from society, breaking free from the “chronic ailments” of traditional thinking.

The staffing of central state-owned enterprises will be determined entirely by market-based selection and appointment, transforming managers into “business operators” without formal titles.

Breaking the Deadlock of Succession

Regardless of where SOE headquarters relocate, priority will still be given to industrial environments and relevance. Localities should explore new models of “self-sustaining development,” focus on the growth of distinctive industries, build a mental “ladder” for upward mobility, and leverage industrial and energy advantages to develop industrial clusters.

It is not difficult to imagine that when selecting a location, SOEs must inevitably weigh the comparative advantages of different cities.

Just as one casts a net where there are fish and grazes sheep where there is grass, the question remains: who is closest to the market, and who is best suited to settle there?

Take China Rare Earth Group as an example: the reason it established its headquarters in Ganzhou, Jiangxi, was precisely to be close to the resources.

Ganzhou, Jiangxi, has long been known as the “Kingdom of Rare Earths.” It is the site where ion-adsorption-type rare earth resources were first discovered and named, and where the mining process was invented. The region holds 80% of China’s medium- and heavy-rare-earth reserves and over 60% of the world’s total, while its supply of medium- and heavy-rare-earth products accounts for more than 50% of the national total.

Given such abundant rare earth resources, establishing the headquarters here is highly logical, as it enables the company to gain a deep understanding of on-the-ground conditions and make sound development decisions.

The Three Gorges Corporation relocated to Wuhan, Hubei, because the Three Gorges Dam is located in Hubei. The China Electronics Information Industry Group relocated to Shenzhen, Guangdong, due to Shenzhen’s highly developed electronics industry.

Based on these examples, it becomes clear which cities the second batch of relocating central state-owned enterprises will target.

Now, to avoid relocating from one city in need of decongestion to another, when central SOEs relocate from Beijing, they are moving directly to general second-tier cities or third- and fourth-tier cities.

It is worth noting that Jiangsu, as the province with the second-largest economic output in the country and one of the regions with the most dynamic economy, the most balanced regional development, and the highest standard of living, surprisingly does not host a single SOE headquarters. Another economically developed province, Zhejiang, also lacks a single SOE headquarters.

Over the past few years, Xiongan has been the biggest beneficiary. In addition to serving as the primary hub for relocating non-capital functions from Beijing, financial institutions, research institutes, and public institutions have also been transferred there.

However, if all enterprises were to relocate to Xiong’an, it would not be conducive to their development and might even lead to a second round of relocations.

As for where the headquarters of central state-owned enterprises will relocate, two major factors are primarily considered:

First, the national strategic layout; relocations must comply with national arrangements.

Second, market factors must be considered, specifically the alignment between the local region and the SOE’s core business operations.

Of course, the relocation of SOEs is by no means intended merely to “support” regional economic development; rather, it aims to transform them from external “participants” into “chain leaders” within industrial chains, thereby driving the upward development of local economies.