Central SOEs beef up innovation

China's State-owned enterprises will spend more on research and development to bolster innovation-driven growth in the year's second half, which is expected to accelerate the country's industrial upgrading and boost exports of high value-added products, according to government officials and SOE executives.

With rapid restructuring of global industrial, supply and value chains, innovation must be placed in a more prominent position at SOEs, said Peng Huagang, secretary-general of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council.

Efforts should be made to create the means to make more breakthroughs in cutting-edge technologies, he said. Many SOEs have already increased their investment in areas like computer chips, advanced trains and vessels, narrow-body airliners, 5G telecommunications equipment and new materials to reinforce their competitiveness and sustain the country's economic growth, Peng said at a forum held in Tianjin in early August.

Central SOEs' total expenditures on R&D amounted to 378.62 billion yuan ($54.7 billion) in the first half of 2022, soaring 19.7 percent on a yearly basis, according to SASAC, the country's top regulator of State assets.

The R&D input of central SOEs has maintained double-digit growth during this period. Government data also showed that the combined revenue of central SOEs stood at 19.2 trillion yuan in the January-June period, up 12 percent year-on-year. Their net profits came in at 1.09 trillion yuan, growing 6.1 percent on a yearly basis.

During a meeting of the Political Bureau of the Communist Party of China Central Committee recently, policymakers stressed that full play should be given to the initiative of enterprises and entrepreneurs, and at the same time, sound policies and a favorable institutional environment must be provided so that State-owned enterprises are encouraged to act, private enterprises are motivated to develop into new areas, and foreign enterprises are inspired to make investments.

The government will guide central SOEs to take further advantage of opportunities generated by the new technological revolution and industrial transformation during China's 14th Five-Year Plan period (2021-25), while keeping liabilities under control, said Hu Chi, a researcher at SASAC's research center in Beijing.

Their focus will be on key fields of emerging industries with sizable growth potential like high-end manufacturing, green technologies and digital, platform and sharing economies. They will cultivate new growth drivers, he said.

Hu said the government will also advocate the next-level integration of the digital economy and the real economy, as well as accelerate 5G to empower thousands of industries and achieve large-scale commercial use across the country.

For instance, a group of SOEs completed the construction of the country's first independently developed test line for trains using rare-earth permanent magnetic levitation (PML) technology in Xingguo county, Jiangxi province, in early August.

Maglev trains, suspended with no need for wheels, are propelled using magnets, usually supercooled magnets that consume a lot of electricity. PML technology, however, relies on permanent rare-earth magnets that, while still consuming power, use much less than the supercooled magnets.

The 800-meter pilot line was jointly developed by China Railway Liuyuan Group, China Railway Hi-Tech Industry and the China National Rare Earth Functional Material Innovation Center, as well as Jiangxi University of Science and Technology. It can be used for trains with medium-to-low speed and volume.

With a designed maximum speed of 80 kilometers per hour, the rail system is able to handle a two-car maglev train that can transport 88 people. The transit system is equipped with the Beidou Navigation Satellite System, 5G capabilities and smart sensing technologies.

Chen Guodong, general manager of Tianjin-based China Railway Liuyuan Group, a unit of Beijing-based China Railway Group, said the maglev train is an advanced system that can serve many scenarios, such as transportation at scenic spots, airport terminal connections, business centers and small towns in both domestic and global markets.

Chinese telecom operators have altogether invested 401.6 billion yuan in 5G, according to information released during the 2022 World 5G Convention, held in early August in Harbin, capital of Heilongjiang province.

China has some 1.85 million 5G base stations and more than 450 million 5G end users, both accounting for over 60 percent of the world's total, the conference said.

The accelerating application of 5G technology has led to the emergence of new industries and new modes of business. A number of Chinese enterprises are currently leading the world in 5G R&D and applications, said Liu Liehong, chairman of Beijing-based China Unicom.

"China's 5G construction has made remarkable breakthroughs. It has made notable progress in the fields of the industrial internet and smart cities and villages," said Wu Hequan, an academician at the Chinese Academy of Engineering.

In addition, the government recently established China Mineral Resources Group, a new, centrally administered SOE, to ensure the nation's supply of minerals. It also has called on its central SOEs to further live up to their responsibilities in promoting energy conservation and environmental protection.

Central SOE practices in those two areas will be supervised and managed in a dynamic and orderly manner based on the industry, energy consumption, emissions levels of major pollutants and impact on the environment, according to a guideline recently unveiled by SASAC.

The guideline stresses that central SOEs should curb blind development of low-level projects that entail high energy consumption and high emissions, and notes that overseas production and business activities should also better abide by local environmental protection laws and regulations.

The policy document also encourages central SOEs to develop green and low-carbon sectors related to their main business.