UPDATE 1-China's SASAC denies report on private stakes in state firms

Monday, 11 Nov 2013 | 9:37 PM ET

(Recasts Nov 11 story with SASAC denial, changes date)

SHANGHAI, Nov 12 (Reuters) - China's supervisory body for state-owned companies has denied a media report that it will allow private investors to buy up to 15 percent stakes in state enterprises (SOEs), adding that it will unveil a reform plan "as soon as possible".

The State-owned Assets Supervision and Administration Commission (SASAC) said late on Monday that a report in the official English-language China Daily newspaper earlier that day was incorrect. SASAC issued the denial in a short post on weibo, the Chinese version of Twitter.

Chinese leaders are gathered in Beijing this week to establish the economic blueprint for the next 10 years, and SASAC, which administers more than a hundred of China's biggest state-owned companies, has said reform of SOEs is a major area of focus.

The China Daily report quoted Bai Yingzi, director of SASAC's enterprise reform division, as saying that private investors could create private equity consortia to purchase direct stakes in SOEs between 10-15 percent of assets, without giving further details.

Private investors are already allowed to purchase shares in major state-owned enterprises listed on domestic stock exchanges, but state-owned entities usually retain a controlling interest.

Private and state-owned firms can currently create joint ventures in which the private share is higher than 15 percent.

The report cited a joint venture between privately held industrial conglomerate Fosun Group and state-owned China National Medicine Corp in 2003, in which Fosun owned 49 percent, but described it as a "rare exception."

In June the official Xinhua news service reported that public utilities would be opened up to private investment.

Late last month, an influential think-tank, the State Council's Development Research Centre, recommended ending state-owned monopolies in the rail, oil and gas, and electricity industries, as a key reform.

Other high-level officials, including former premier Wen Jiabao, have called for state-owned banks, key financial enablers of inefficient SOEs, to be subjected to more competition.

Many economists and analysts remain sceptical that China will take more substantial steps to end SOEs' privileged market monopolies during this week's Communist Party plenum, due to a lack of consensus between conservatives and reformers.

The last time SOEs faced a major reform and restructuring programme was in the 1990s, when most of them were loss-making bureaucratic dinosaurs. These days, SOEs are more profitable, though their better performance is partly attributable to an ability to borrow cheaply and roll over debt indefinitely.

(Reporting by Pete Sweeney; Editing by Simon Cameron-Moore)