State-owned enterprises acquire tens of billions of shares in Suning Tesco The trend of nationalization of private enterprises is irreversible

The scale of private enterprises is gradually shrinking under the retreat of the state. An employee works at Suning’s logistics base during the “Double Eleven” online shopping festival in Nanjing, Jiangsu province, China, Nov. 11, 2019.

Suning Tesco, a private Chinese company, issued an announcement this Thursday (Feb. 25) after suspending trading on the Shenzhen Stock Exchange, saying Zhang and Suning Electric are planning a stake transfer, with plans to transfer nearly two-and-a-half percent of its shares. Market sources said that Suning Tesco stake will be transferred to a number of state-owned enterprises in Jiangsu and Guangdong. Analysts believe that China’s private enterprises have reached the end of the road, while state-owned enterprises will also “take the old road”, operating conditions back to the past.

At noon this Thursday, Suning Tesco’s announcement said it received a notice from the company’s actual controller, controlling shareholder Zhang Near East, and shareholder Suning Electric Group Co. It was previously rumored that Suning had plans to sell all or part of its 19.99% stake to Jiangsu state-owned enterprises and Guangzhou state-owned enterprises, with a valuation range of 8 billion to 10 billion yuan. The number of equity transfers announced this Thursday exceeds the rumored holdings.

In response to Suning’s suspension today, the listed company’s party latest said that if the state capital enters, the capital strength will be enhanced, thus further promoting the development of Suning Tesco in the retail industry, and more importantly, Suning Tesco may turn into a state-controlled enterprise.

Private enterprises can only give up equity to state-owned enterprises in order to survive

The financial scholar Commander lamented that Suning Tesco was forced to cede due to its debt woes. He said in an interview with Radio Free Asia that Suning Tesco’s switch to a state-owned enterprise was expected: “It shows that the appetite of state-owned capital is getting bigger and bigger, and Suning will then become a state-owned capital holding company. The fact that it is now suddenly rumored that Nanjing and the Jiangsu State-owned Assets Supervision and Administration Commission want to take a controlling stake in this company indicates that Suning’s top management may be under pressure from the Chinese government and forced to make a critical choice. Suning is going to be forced to cooperate and make compromises with the government if it wants to survive in China.”

China Business News reports that the Nanjing State-owned Assets Supervision and Administration Commission will most likely be the new controlling party of Suning Tesco and lead the negotiations for Suning’s debt restructuring. Suning Tesco’s shareholding structure shows that the company’s actual controller Zhang Near East holds 20.96%, Taobao (China) Soft Ltd. holds 19.99%, Suning Electrical Group holds 16.8% and Suning Holdings Group holds 3.98%.

Currently, the total share capital of Suning Tesco is 9.31 billion shares, if measured by the closing price of RMB 7 yuan on the 24th, the transfer ratio of 20% to 25%, the takeover price is about 13 to 16.2 billion yuan.

The commander said to the Chinese government wants private enterprises to serve the government completely: “To make China’s private giants, to be able to serve including the 14th Five-Year Plan, major development strategies, I hope these private enterprises can want to state-owned enterprises as obedient.”

The country into the people under the scale of private enterprises gradually shrink

Wang Li, a garment factory manager in Wenzhou, Zhejiang Province, said in an interview with this station that’s operational difficulties are related to the current political environment, and it is only a matter of Time before private enterprises are gradually acquired by state-owned enterprises and become state-owned enterprises: “In the past few years, the big push into the retreat of the people, the government has seized a large number of private enterprise resources, many enterprises have no way to do so, and have long been unable to do so. The theory of so-called communism is that the means of production must be nationalized. You do not have the means of production, private enterprises certainly can not develop.”

As early as the 1990s in the world of the last century, the Chinese government, in order to develop the national economy, has changed the ownership system of state-owned enterprises, turning the difficult-to-operate state-owned enterprises into a shareholding system, with private funds holding shares. In the following decades, China’s private enterprises grew rapidly. But in recent years, there has been a regression of state-owned enterprises “bailing out” private enterprises.

State-owned enterprises will only bring them to the brink of collapse

Wang Li worries that if private enterprises turn into state-owned enterprises, they may end up collapsing: “After the state-owned enterprises screw up the private enterprises, they will further spoil the means of production, and eventually the state-owned enterprises will kill themselves. State-owned enterprises certainly not, economically speaking, where monopolistic enterprises eventually lead to collapse, which is 100 percent possible.”

The current market disclosure, Suning Tesco equity buyers are Jiangsu Guoxin Investment, Jiangsu Traffic Holdings and Traffic Nongken Group, they are all wholly owned by the Jiangsu Provincial Government State-owned Assets Supervision and Administration Commission, Nanjing New Industry Investment is wholly owned by Nanjing State-owned Assets Supervision and Administration Commission. In addition, Guangdong also has a state-owned enterprise shares in Suning Tesco.

Suning Tesco’s performance forecast announced at the end of last month showed that Suning Tesco’s revenue size in 2020 was between 257.6 billion and 260 billion yuan, showing a year-on-year decline, while turning a net loss from profit to loss of between 3.95 billion and 3.45 billion yuan.