A Research On The Capital Allocation Of COFCO In Establishing The State-owned Investment Corporation

The state-owned investment company,existing in many countries' economic systems,is a special enterprise corporation with national investment and authorization that carries out a series of equity operations on state-owned capital as an investor.In China,as a form of enterprise,it took shape in the late 1980 s during the process of the transformation from command economy system to market economy system.Taking COFCO as the case study object,this essay analyzes its agent to allocate capital and its performance based on the capital allocation processes of some of its subsidiaries,trying to figure out referential experience and deficiencies from the establishment of the state-owned investment company.Capital is driven by profit which means where there is profit,there is influent capital while it is also under the control of blindness without the timely adjustment of a “tangible hand” in significant areas that concerns the national economy trend.As state-owned investment corporation is the main part of government investment,establishing a state-owned investment company either insists the development direction of national economy or keeps accordance with the national industrial policies;either helps to realize the adjustment of national economic structure or enables the promotion of the optimized allocation of national economy.COFCO,as the pilot of the state-owned investment company,faced double pressure of reform and development which urged it to develop and strengthen itself making use of the reform opportunity.The capital allocation strategy is key to its development.Relying on proper allocation,the enterprise can develop well.And it is the enhanced efficiency of capital allocation of COFCO that helps realize the effective operation of national investment company.COFCO's optimized capital allocation process can be divided into three stages.The first stage is mergers and acquisitions.COFCO's optimization and reorganization of the industry and mergers and acquisitions of resources in the process of building an internationalized industrial chain;The second stage is to divest non-performing assets,and COFCO gradually withdraws from non-strategic and non-competitive industries to create a highly efficient industrial chain structure;The third stage is the introduction of external investors.COFCO Group introduces external investors as the main means of capital allocation,expands financing channels to alleviate endogenous financing constraints,optimizes capital composition,introduces external supervisors,and effectively leverages state-owned capital.Through the optimization of capital allocation in these three stages,the problems existing in the establishment of the State Investment Corporation of COFCO have been solved to a certain extent,and the value of the enterprise has been improved.