China Railway Signal & Communication Corporation Limited | Supporting Central SOEs to Achieve High-Quality Development, SSE Reaches Strategic Cooperation with Three Central SOEs

China Railway Signal & Communication Corporation Limited

Recently, the Shanghai Stock Exchange (SSE) signed strategic cooperation agreements with Aviation Industry Corporation of China, Ltd. (AVIC), China Aerospace Science and Industry Corporation Limited (CASIC) and China Huadian Corporation Ltd. (China Huadian) respectively. The SSE noted that it will take the signing of the strategic cooperation agreements as the opportunity to work with the three central state-owned enterprises (SOEs) to give full play to their respective advantages in cultivation, restructuring and listing, market financing and investors relations, etc. of the companies to be listed. This cooperation will promote the quality and governance level of listed central SOEs and achieve win-win results.

Reaching Strategic Cooperation with Several SOEs

The signing of strategic cooperation agreements among SSE, AVIC, CASIC and China Huadian is an important initiative for central SOEs to utilize the capital market to gain high-quality development and improve scientific and technological innovation. It is also the major step for SSE to give full play to the role of the capital market to support real economy and implement innovation-driven development strategy.

The central SOEs are the national team and the main force in the fields of high-end manufacturing, aerospace, transportation and electronic information communication, etc. They are also the backbone of building the modern industrial system, playing an increasingly important role in promoting the development of strategic scientific and technological innovation and the construction of a modern energy system.

Among these three central SOEs, AVIC works hard to become a source for original aviation technology to promote the high-level self-reliance and self-improvement of technology in the aviation industry. CASIC is the main force in building an aerospace power and national defense weaponry, and is a leading enterprise in the development of China's industry information technology. China Huadian actively responds to green, low-carbon and high-quality development and provides strong safety guarantees for building new power system centered on new energy.

Notably, before signing agreements with above three central SOEs, SSE had signed the strategic cooperation agreement with China Reform Holdings Corporation Ltd. in September 2022. Focusing on serving central SOEs, the two sides will promote them to optimize their existing business and refine their incremental business, and carry out comprehensive cooperation in serving the quality improvement of state-owned listed companies, promoting the healthy development of the capital market and facilitating the improvement of the layout and structure of the state-owned sector.

Empowering the Reform and Development of Central SOEs by Capital Market

The SSE always takes serving the reform and innovation of SOEs and central SOEs as an important task and seeks to build itself into the main battlefield for the capital market to support the central SOEs' reform and development.

In terms of number of listed companies, there are 213 SSE listed companies controlled by central SOEs under the State-owned Assets Supervision and Administration Commission of the State Council (hereinafter referred to as "SASAC Central SOEs on the SSE"), among them, 192 listed on the Main Board and 21 on the STAR Market. In terms of industry distribution, SASAC Central SOEs on the SSE are mainly involved in key industries concerning national security and lifelines of national economy, and the key areas related to China's national economy and people's livelihood. In terms of business performance, the operating revenue and net profit of SASAC Central SOEs on the SSE reported an increase of 14% and 15% respectively for the first three quarters of 2022. In terms of high-quality development, SASAC Central SOEs on the SSE have implemented the M&A and restructuring, non-public offering and stock option incentive, continuously increased the level of cash dividends and strengthened shareholding increases and repurchases to provide a good return for investors.

In terms of the number of IPO listing, the SSE has accepted 20 more IPO applications for companies controlled by central SOEs since this year. It has supported central SOEs that are related to the lifeline of national economy back to the A shares market for listing, including China Mobile Limited, China Telecom Corporation Limited and encouraged them to gather innovation resources and enhance capability.

In terms of capital operation, on one hand, the SSE supports central SOEs to optimize their layout through M&A and restructuring. Since 2020, SSE Main Board has reported 30 central SOEs that completed M&A and restructuring, with accumulated transaction amount of nearly 70 billion yuan. On the other hand, the SSE encourages central SOEs to implement mixed ownership reform through marketization and promotes complementarity and mutual benefit of various forms of ownership.

In addition, the SSE bonds market offers financing support with low cost for central SOEs, advancing 3 Publicly-offered Infrastructure REITs of SASAC central SOEs listed on SSE. Various ETFs themed SOEs and central SOEs have been launched and relevant indexes compiled and released, guiding funds to key areas reformed by SOEs and central SOEs. Some listed companies controlled by central SOEs even go public overseas through Shanghai-London Stock Connect and China Europe International Exchange to realize global layout.

Accelerating the Formation of Central SOEs Matrix in Scientific and Technological Innovation

Over 20 enterprises controlled by central SOEs have gone public on the STAR Market since its launch, raising funds more than 54.3 billion yuan, which has promoted the agglomeration of innovation resources and enhanced capability of central SOEs.

It is reported that after listing on the STAR Market, relevant central SOEs have made full use of the financing platform of the STAR Market, helping achieve self-reliance in technology. Among them, Zhuzhou CRRC Times Electric Co., Ltd. has realized domestic production of its train core system instead of import. In terms of cutting-edge technology breakthrough, China Railway Construction Heavy Industry Corporation Limited has developed full-section shaft roadheader with the world's largest diameter and shield machine with the largest diameter in China. In terms of implementing Carbon Peaking and Carbon Neutrality, China Railway Signal & Communication Corporation Limited has optimized emission reduction in its production and R&D and improved operation strategy and curve of trains, with energy consumption of single train traction down by 14.9%. Furthermore, listed companies on the STAR Market, including carbon fiber leader Zhongfu Shenying Carbon Fiber Co., Ltd., lithium battery cathode materials leader Hunan Changyuan Lico Co., Ltd. and "country's advanced equipment" of rail equipment Zhuzhou CRRC Times Electric Co., Ltd., have made significant progresses in R&D and business performance.

In terms of "backup force", the "Central SOEs Matrix" of scientific and technological innovation is accelerating the formation. According to the data released by China Association for Public Companies, as of the end of August, there were 31 central SOEs applied for A shares IPO under examination, of which 10 Main Board companies, 11 STAR Market companies, 7 on the ChiNext board and 3 on Beijing Stock Exchange.

In September, Weng Jieming, Vice Chairman of SASAC stressed that central SOEs should make full use of the platform of the STAR Market, better serve the overall situation of national scientific and technological innovation, and strive to become a model of scientific and technological innovation.

The SSE said that it will further improve mechanisms and systems based on preliminary planning and scheme design, vigorously boost comprehensive services of central SOEs, keep boosting listed central SOEs to optimize their existing business and refine their incremental business. It will also make greater contributions to advance the platform construction for listed central SOEs, help capital market and state-owned capital to better synergize and achieve positive interaction between the promotion of capital market and the high-quality development of central SOEs.