In a wave of state-owned enterprises “bottom-fishing” private enterprises that has been ongoing since 2018 and continuing into this year, numerous local state-owned enterprises have become controlling shareholders of private enterprises, and cross-border acquisitions have become mainstream. Despite warnings from mainland media about potential problems, this wave of “bottom-fishing” private enterprises continues to expand. Experts reveal the essence of China’s state-owned enterprises “bottom-fishing” private enterprises: “Salvation” is just rhetoric, the core is merger and control, driven by interests and institutional factors.
In the past, the Chinese Communist Party (CCP) promoted public-private partnerships, and under Xi Jinping’s leadership since 2014, it introduced the concept of “mixed ownership reform” (allowing private capital to enter or state-owned enterprises to invest in private enterprises). According to China Securities Network citing official data, from 2013 to 2017, private capital participated in central enterprise mixed reforms through various means, with investment amounts exceeding 1.1 trillion yuan. However, this did not involve giving private enterprises control of state-owned enterprises but rather allowing private minority shareholders to receive investment returns in non-core businesses. During the same period, state-owned enterprises began investing heavily in non-state-owned enterprises, with provincial state-owned enterprises investing more than 600 billion yuan in non-public enterprises.
In 2017, state-owned enterprises’ stakes in private enterprises accelerated, leading to a public opinion trend of “private sector exit.” China Securities Network reported that in just 2018, 50 private listed companies announced receiving investment from state-owned capital. After experiencing restructuring and leveraged buyout models, state-owned enterprises gradually shifted towards acquisition strategies in emerging industries.
From 2023 to 2024, the trend of state-owned enterprises acquiring private enterprises accelerated. By September 2024, control of over 20 private listed companies had shifted from individuals to central or local state-owned enterprises, with more than 10 such cases in July 2024 alone. The pace of acquisitions increased in 2024, with cross-border acquisitions becoming the dominant model, accounting for over 70%.
Chinese media reported in June 2025 on the acquisition of listed companies in 2024, with 24 cases of “state-owned enterprises acquiring private enterprises,” 13 cases of “state-owned enterprises acquiring state-owned enterprises,” and 6 cases where entities without actual controllers became state-owned entities, the majority of which were local state-owned enterprises.
In July this year, two new cases emerged. Firstly, after Sichuan provincial state-owned enterprise Shudao Investment Group became a major shareholder, partial equity of Sichuan Tianfu Bank was publicly auctioned. Multiple private enterprise shareholders faced unfavorable conditions, with related equity frozen. Since 2024, the bank’s veteran leader, Huang Guangwei, has been abroad.
In another case on July 17, the former “leading high-end snack” company Good Goods Store announced that its controlling shareholder, Ningbo Hanyi Entrepreneurship Investment Partnership Enterprise and its concerted action person Ningbo Good Goods Investment Management Co., Ltd., planned to transfer a total of 21% of the company’s shares to Wuhan Yangtze International Trade Group for a total consideration of 1.046 billion yuan. Following the transaction, the Wuhan State-owned Assets Supervision and Administration Commission would become the actual controlling shareholder of the company, with Yangtze International Trade (a wholly-owned subsidiary of Wuhan Financial Holdings) becoming the controlling shareholder.
The Chinese Entrepreneur Magazine stated that this was the first case of local state-owned capital controlling a company in the A-share leisure food industry, reflecting the deep integration of private enterprise transformation dilemmas and local strategic layout.
In 2018, Chinese media once enthusiastically reported on the “heat of state-owned enterprises supporting private enterprises,” but in 2024, Sohu Finance rarely questioned: “After succeeding in acquisitions, why not step back?” The report pointed out several problems with this approach:
Strong fiscal provinces and cities would have a competitive advantage in acquisitions, exacerbating regional development imbalances; excessive borrowing for investment by local state-owned enterprises could worsen local government debt; excessive intervention by local governments could distort market signals; cross-border acquisitions could disrupt existing industrial eco-systems; inefficient state-owned enterprise operating methods might spread to the acquired private enterprises; post-acquisition disputes might arise over company control, and give rise to a group of “acquisition intermediaries” and opportunities for rent-seeking and corruption.
However, this report did not have any impact on the wave of state-owned enterprise bottom-fishing, nor did the authorities respond.
American economist Davy J. Wong analyzed the logic behind Beijing’s state-owned enterprise bottom-fishing for the Epoch Times, stating that ” ‘Salvation’ is just rhetoric, and it is actually strategic merger and control. Its primary goal is not assistance but rather to take over and control.”
Wong analyzed the driving force behind state-owned enterprise bottom-fishing, citing firstly local debts pushing local governments to seek asset liquidation paths, with private enterprises becoming targets. Secondly, deteriorating credit of private enterprises leading to significant valuation declines, allowing state-owned enterprises to gain control at very low prices. Lastly, so-called strategic security considerations, with certain sensitive industries becoming acquisition focal points.
Chinese-American economist Li Hengqing told the Epoch Times that state-owned enterprises bottom-fishing private enterprises, some are genuinely due to private enterprises being unable to operate normally, and the government intervenes to prevent economic chain reactions. However, there is also malicious takeover, such as forcing companies like Tencent’s WeChat Pay and Alibaba’s Alipay to hand over their entire database under the guise of national financial security.
Wong stated that the Beijing authorities allow and encourage the expansion of state-owned enterprises primarily because “state advances, private retreat” is a fundamental national policy.
Li added that since Xi Jinping took office, the acceleration of “state advances, private retreat” aims to strengthen state-owned enterprises to protect the party, as the funds of state-owned enterprises can be freely mobilized.
He continued, stating that various factions of Xi’s administration are seizing control of the private economy, with the asset restructuring process being a means to wealth. “This is their real motivation. Therefore, the enthusiasm for central and local government mergers and acquisitions of private enterprises is very high. Private enterprises have no other choice in this wave but to close one by one.”
Over twenty years ago, Chinese private entrepreneurs could even acquire restructured state-owned enterprises, but in recent years, the situation has reversed.
Wong pointed out that in the 1990s during state-owned enterprise reforms, private enterprises flourished; however, over the past decade, there has been a complete reversal, akin to “state advances, private retreat 2.0,” reminiscent of the public-private partnerships in 1952 and 1953. “This indicates that China’s political and economic system has entered a new stage of centralized national capitalism.”
Li also noted that over twenty years ago, private enterprises were emerging, focused on managing their own businesses seriously, while state-owned enterprises had common pooled resources until they ran the companies into the ground. During Premier Zhu Rongji’s tenure, state-owned enterprises were auctioned off in large numbers to save them, with private enterprises even operating inside state-owned enterprises’ shells. However, the situation is different now, with many private enterprises unable to obtain loans and facing market barriers, unable to continue operations. State-owned enterprises are prioritized for development, ultimately bottom-fishing private enterprises due to the system created by the CCP.
With the economy facing a downturn in recent years, the Beijing authorities have once again proclaimed support for the private economy, with the “Promotion of Private Economy Law” coming into effect in May this year.
Wong stated that official support for private enterprises from Beijing is more of a propaganda tool that turns into assimilation in practice. As confidence in foreign and private enterprises continues to erode, the introduction of policies is more about stabilizing rhetoric, rather than effecting real change. “It’s like North Korea; the poorer it gets, the more controlled by state-owned enterprises it becomes, even though efficiency is very low, the result is an enhanced control and ownership of the ruling class over the country.”
Li mentioned that private enterprises have contributed significantly to tax revenue and employment. However, over the past decade, the CCP has vigorously pursued “state advances, private retreat,” terrifying many private entrepreneurs into withdrawing, which in turn frightened the authorities in Zhongnanhai. Under the pressure of economic crisis, the authorities had to once again publicly declare support for private enterprises. However, many private entrepreneurs know that once the economic situation improves, the CCP will show its true colors because the Communist Party has long written in its party constitution: to eliminate private ownership and the bourgeois class is its ultimate goal!