A Study On The Combination Of State - Owned Capital And Finance

The combination between industry and finance is one of the most important topics of the economy development at the moment. With the development of information technology, the cost of communication and information decreases deeply. The direct investment and technology transformation has become the most competitive model in the international market. The globalization of production, market and capital is the background of the economy development. On the one hand, emerging economies can easily get the fund, technology and advanced experiences which are in urgent need. On the other hand, they have to face the pressing of the experienced trade, finance and production which the developed economies push.Chinese state-owned capital consists of the important part in constructing the socialist market economy, while it is the major base of the economic and social development. So, the state-owned economy must hold the domain position, so as to improve the running efficiency of the stated-owned capital, to raise its capability to preserve and increase the value along with competing. In order to boost the competition in the international market, it is necessary to innovate how to run the state-owned capital and how to promote the combination between industry and finance.The rules that industrial capital and the financial capital integrate are as following:Firstly, we’d better keep the balance of industrial capital and the financial capital in the state-owned capital so that the industry and the finance maintain balance.The combination between industry and finance should insure that financial capital can serve for the industrial capital and real economy. Chinese state-owned capital should do more to keep appreciable proportion in industrial capital and financial capital, to optimize its structure, so it can keep balance in the processing of financial deregulation.The first important thing to promote the combination between industry and finance is to ease the short of fund in the internal of the state-owned enterprises. The financial channel should be enlarged, so the indirect finance which deeply depends on the banks can change into the direct finance that appears market-oriented and diversified. This can not only relive the stress of the credit resources, but can foundationally decrease the debt ratio of the state-owned enterprises. Since the SOEs, especially those which are in the upper reaches of the industrial chain, they belong to capital-intensive ones, usually own lots of assets which could be mortgaged, so they are easily able to meet the demand of the bank, then gain loan from the bank. However, those SOEs hold the excess capacity which should be cut down, so the industrial capital could catch the strategic shifting.The next step, the state-owned capital integration could reach a strategic start when the SOEs become the transnational corporations and lift their international competitiveness. Many SOEs succeed in the integration of state-owned capital such as COFCO, China Resources Holdings and Lenovo Group. COFCO puts the whole industrial chain investment strategy into effect. The main reason why this strategy is able to succeed is that its capital running includes banks, securities companies, insurance company, futures firm, fund, and so on. Its financial profit is more than the one from industrial chain, which is helpful to the whole industrial chain running method.Recently, the combination between industry and finance in Chinese SOEs has been taken shape. 87 SOEs have carried out the combination between industry and finance among 117 SOEs which are managed by the SASAC. Most of them make success, so the combination between industry and finance must maintain an appreciative proportion to keep the balance.Secondly, the aim is seen as meeting the demand of the industrial capital, to innovate the financial capital running mode.The development of Chinese capital market is later than the socialist marketing construct. It is the imperfect of Chinese capital market that restricts the competitiveness of SOEs. With the gradual enlargement of the SOEs, it is the combination between industry and finance that determines whether the SOES form core competiveness or not. SOEs cannot match its development speed with the growth of the whole market if they only depend on capacity expansion, then they would be marginalized and cleaned out. Today, the average rate of profit in finance is higher than that in industry. If the SOEs carry out single capacity expansion strategy, the growth will be confined.In order to increase the running efficiency of state-owned capital, the mode of financial capital running must be innovated. It must be done as follows:The reform of the financial system must be deepened, while the financial environment must be innovated; The financial tool must be developed and innovated, so that it can improve the validity of the market and meet the demand of the investors; The capitalization reform of the SOEs must speeded up, bring the state-owned capital running into the unified marketing system, so they can compete fairly and improve economic efficiency.Thirdly, capital market must be improved and perfect to lay the foundation for the capital running of the state-owned investment companies.The third plenary session of the eighteenth proposed that we should set up state-owned running company, support the qualified SOEs to change into state-owned capital investment companies, which is a new idea to run state-owned capital. It is to improve the capital market construction, to prompt the reform of the registration system of the stock issue, to push equity financing, to lift the ratio of direct financing that can support the capital running of state-owned running company with good market environment and systemic warrant.Speeding up the development of direct financing in SOEs may enlarge the financial channel, improve the debt structure, deduce the occupation of credit resources and risk due to non-performing loan. At the same time, it present stricter demand for the market environment, which means the developed capital market, regulatory and effective supervise. If all those can not be finished, in fact, the risk of direct financing is higher than the indirect one. At present, Chinese SOEs are only able to develop direct financing in an appreciate proportion.The issue of stock and government bonds and corporate bonds is out-of-balance. Capital market is hard to play a determinate role in resources allocation, which restricts the mechanism shift of SOEs. So it can not sever for the state-owned industrial capital, while it is a kind of manifestation that the credit system is not good.The main reason that capital market is hard to get breakthrough is the over-administration of issue and trading system in capital market.Both the transformation from the approval system to the registration system and the improvement of capital market are the important measures. The effect of it should be tested in the practice.This paper analyzes the integration of state-owned capital from its running and investment. Since the SOEs have finished share-holding system reform, if they could preserve and increase the value of state-owned capital or not is determined by the performance in the complex market. At the same time, once the state-owned capital runs efficiently and orderly, it can prompt the construct of the multi-level capital market. So, Chinese economy would recovery and soar again after the shifting in the development mode and growth.