Ratio of State-owned Assets in Hangzhou Zhongce Rubber Dwindles Further

Temasek Holdings disclosed recently that it added new investment in China, including Chinese tire producer Hangzhou Zhongce Rubber.

It suggests that the ratio of state-owned assets in Zhongce might decrease further from previous 40%.

At the end of 2014, BOCGI Zheshang Investment Fund, CITIC Private Equity Funds, Fosun Capital, and Sany Group invested in Zhongce Rubber through Hangzhou Equity Exchange.

The four investors took up a 60% stake in Zhongce Rubber, reducing the portion of state-owned assets in the tire producer to 40%.

In September 2014, Hangzhou Equity Exchange announced that Zhongce Rubber planned to initiate asset reshuffle through private placement.

Zhongce Rubber decided to transfer a 24.9425% state-owned stake and intangible assets, including the “Chaoyang” and other trademarks, through Hangzhou Equity Exchange, with the listing price starting at 1.913 billion yuan.

At that time, Li Haotian, board member and president of BOCGI Zheshang Investment Fund, said although Zhongce Rubber remains the single largest shareholder, the introduction of four stakeholders changed the company’s nature as a state-owned company.

BOCGI Zheshang Investment Fund’s shares in Zhongce Rubber stand at about 7-7.5%.

By introducing in powerful strategic investors, Zhongce Rubber enhanced its competitiveness, changed its system and mechanism, and fostered its development. It is an attempt by Hangzhou city in boosting the development of mixed-ownership economy.

An analyst said that as the government encourages state-owned enterprises’ reshuffle, some private equities have been investing in the market, expecting to receive stable investment returns.

Wu Yibing, co-president of Temasek Global Strategy and Risk and president for Temasek China, reckoned that Chinese economy slows down in general, traditional resource industry and overcapacity industries confront downcast pressure, but there are still huge potential for development.

Zhongce Rubber is currently one China’s largest tire producers and ranked the 10thamong global tire producers. Its sales revenue in 2015 was 25.6 billion yuan.