Are state-owned enterprises coming?

Are state-owned enterprises coming?

Have SOEs already arrived?

The topic of “SOEs leaving Beijing” has once again struck a nerve across local regions. In our memory, since the 2014 adjustment to relocate non-core functions away from the capital, we haven’t heard major announcements every year. Could the relocation of SOE headquarters be nothing more than a pipe dream?

In reality, the capital’s “big-city ailments” are worsening, making it resemble an out-of-breath patient suffering from obesity. The government has set new requirements for urban management and industrial development, namely accelerating the “slimming down” of non-capital core functions. Among these, the “bulky” SOEs are the first to bear the brunt.

A single move affects the whole body; there appears to be a trend of “SOEs accelerating their departure from Beijing, with localities springing into action upon hearing the news.” Where these enterprises will relocate and which industries will be relocated have become the hotly contested prizes in local investment promotion campaigns. It is not hard to imagine that when SOEs select a location, weighing the advantages of different cities is indispensable.Just as one casts a net where the fish are and grazes sheep where the grass grows, the question remains: which cities are closest to the market, and which are best suited for long-term settlement? As the curtain rises on local efforts to attract SOEs, are these regions truly prepared?

Why would they ever move?

According to the latest directory, there are over 90 central SOEs (excluding financial institutions). Geographically, they are almost exclusively concentrated in Beijing. From another perspective, among these central SOEs, the top 51 are classified as vice-ministerial-level enterprises. Of these, 34 have their headquarters in Beijing, accounting for a full two-thirds.

This is not a matter of chance but a result of the system. SOEs are both economic entities and part of the administrative hierarchy. With headquarters in Beijing, their daily operations inevitably involve interaction with the State-owned Assets Supervision and Administration Commission (SASAC) and the National Development and Reform Commission (NDRC), while special matters must be promptly reported to national authorities. Coupled with the city’s advantages in science and technology, talent, education, and healthcare, why on earth would they move?

However, with urban spatial adjustments and the demands of market-oriented reform and development, SOE headquarters are accelerating their “exit from Beijing.” Beijing must inevitably relieve its burden, and a new era is approaching… In fact, the relocation of SOE headquarters is nothing new.Looking back, Shougang Group relocated its steel production operations to Qinhuangdao, Qian’an, and Caofeidian in Hebei Province, while retaining its non-steel businesses in Beijing, becoming a pioneer in the integration of the Beijing-Tianjin-Hebei region. More recently, China Electronics and China State Shipbuilding Corporation are set to relocate to Shenzhen and Shanghai, respectively, this December. Will the list of relocating SOEs continue to grow?

To date, seven SOEs have moved their headquarters out of Beijing this year. This implies that it is no longer easy for outside companies to relocate to Beijing, while SOEs must also be partially relocated out of the city. With new entries “frozen” and existing ones “cleared out,” a “wave” of SOE relocations is about to take shape.

Do localities have the capacity to accommodate them?

Undoubtedly, the relocation of SOEs from Beijing has become a highly sought-after target for investment promotion across the country. Even cities in central and western China, such as Xi’an and Zhengzhou, often go to great lengths to attract SOE headquarters.

In the past, most people assumed that SOEs would relocate only 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 regions capable of hosting major SOEs will extend far beyond Tianjin and Hebei. Sub-provincial cities and new districts with high concentrations of industries will be able to match specific SOE types, and these areas also possess the capacity to welcome SOEs.

Resource-Based Enterprises: The Crown Jewels

Currently, SOEs in the mineral resources sector dominate the upstream segments of various production chains, with CNPC and Sinopec standing as industry monopolies. When a company like China Rare Earth Group relocates, it inevitably seeks areas with concentrated rare earth resources. At a glance, regions such as southern Jiangxi, northern Guangdong, and Liangshan in Sichuan account for 98% of the country’s total rare earth reserves.Similarly, Shanxi, Shaanxi, and Northeast China’s efforts to attract SOEs in the coal and agriculture sectors represent a development path tailored to local conditions.

Heavy Industry—The Apple of the Eye

Heavy machinery is often called the "mother of industry" and serves as the backbone for resolving China’s bottlenecks in major equipment manufacturing. Cities like Zhengzhou, Changsha, and Chengdu could vie for the presence of the China National Nuclear Corporation and the China National Machinery Industry Corporation. These central state-owned enterprises not only allocate resources in central and western China but also have key subsidiaries there, with the regions adjacent to their registered locations possessing a solid foundation for hosting them.

Technology-Driven Enterprises — The Brain Center

As is well known, technological innovation is the fundamental driving force behind development. In terms of technology transfer and high-tech innovation, cities such as Hefei, Dongguan, Suzhou, and Xi’an possess distinct advantages. By relocating technology-focused SOEs to regions where private enterprises are active and leveraging the strong momentum of local integrated circuit and electronic information industries, breakthroughs can be achieved in key core technology sectors. Viewed through the lens of the “common prosperity” goal, this aligns with the overarching strategic vision of the central leadership.

Scattered Like Stars Across the Sky

This large-scale spatial realignment of SOE headquarters is only the beginning. The relocation of functions from Beijing to various regions appears, on the surface, to alleviate pressure on transportation and the environment; in reality, it is a market-oriented reform aimed at “de-administration” to achieve balanced regional development. For local regions to ensure the safe “landing” of SOEs and better align with future development needs, they must not go into this unprepared.

Loosen the ends, but tighten the middle.The heads of SOEs are not only corporate managers but also officials at the national level. They place great importance on sensitivity to policies and information, as well as the efficiency and convenience of administrative processes. Local governments must promptly clear out policies that are outdated or unsuitable for regional development. In terms of administrative approvals, a single chain binds SOEs and local governments together. At the same time, under the principle of “loosening the ends and tightening the middle,” delegating some approval authority allows enterprises to spend more time in the market and less effort dealing with government bureaucracy.

Implement a comprehensive freeze on staffing quotas and gradually de-administratize operations. In line with the direction of institutional reform, adopt a new system of open recruitment and appointment, abandoning the outdated practice of appointment-based systems. Implement a hiring and performance evaluation system to ensure that the market-oriented principle of “flexible entry and exit” is fully realized. At the same time, through open competition for positions and appointment based on job requirements, publicly recruit industry elites and professional talent from society to break free from the “chronic ailments” of traditional thinking.In the future, the staffing of central SOEs will be entirely determined by market-based selection and appointment, transforming managers into “business operators” without formal titles. Focus on the industrial environment and balance regional economies. Regardless of where SOE headquarters relocate, priority will still be given to the industrial environment 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. Overall, we must fundamentally resolve the issue of “survival rates” for industrial relocation in advance, driving regional development and revitalizing urban economies from specific points to broader areas.

Conclusion

The relocation of central SOEs is by no means intended merely to “support” regional economic development; the relocation of non-capital functions from Beijing is no longer just a policy declaration but has entered a phase of substantive implementation. Moving forward, local governments must build robust “nests” in terms of infrastructure, industrial support systems, and differentiated policies to ensure these “fine birds” return to their nests as soon as possible. Even without the label of “Beijing-based,” central SOEs can still strive to be pioneers in regional development and garner greater attention.