Grain and Seed Enterprises Consolidated in Shandong

A flagship grain-trading company and a seed company will be among six state-owned companies to be created by consolidating hundreds of enterprises under the supervision of government bureaus and research institutes in China's Shandong Province.

The Shandong plan appears to be part of China's initiative to strengthen its sprawling system of state-owned enterprises. The plan also dovetails with other initiatives to create competitive grain-trading companies, promote "indigenous innovation" in seeds and animal breeding, and to overhaul the grain reserve system.

Luliang Grain Group (鲁粮集团) will be created by merging 19 enterprises now under the administration of the Shandong Province Grain Bureau. The company's business will encompass the whole supply chain, holding reserves, processing, and distribution. The seed group will be created by merging 78 enterprises under the provincial academy of agricultural sciences. The other four companies will consolidate enterprises under the provincial water management bureau, minerals bureau, academy of science, and coal field bureau. In all, 221 enterprises will be merged into six "first tier" state-owned enterprises. The formation of the companies is due to be completed by the end of October.

The grain company was described by a provincial official as having a relatively strong foundation with a high degree of market orientation. On this basis, the company will have a high degree of independence from its grain bureau overseers. Each company will decide on the degree of independence from bureaucratic managers based on its situation.

The new companies will have a mix of commercial and public functions. The companies under research institutes will get favorable tax treatment because they have to bear teaching responsibilities. The grain company will hold provincial grain reserves while also functioning as a commercial trader and processor.

Shandong has 616 state-owned enterprises under 44 departments with 84.3 billion yuan in assets and employing over 41,000. Another 98 enterprises in Shandong province will be closed because their debt-asset ratio was too high. The bureaus overseeing the enterprises slated for closure will have to decide how to dispose of the assets.