Supporting Mergers and Reorganizations of Central Enterprises in Industries Such as Nonferrous Metals

　　9 Moon 26 On [date], the founding meeting and unveiling ceremony of China State-owned Enterprise Structural Adjustment Fund Co., Ltd. were held in Beijing. This fund was approved for establishment by the State Council. “ National-level ” Fund, total size 3500 100 million yuan, initial fundraising amount 1310 100 million yuan—the largest equity investment fund currently operating in China. With this, the two major funds identified under the new round of state-owned enterprise reform have been finalized. —— The state-owned capital venture fund and the state-owned enterprise restructuring fund have both been finalized.

　　The China State-owned Enterprise Structural Adjustment Fund is piloted by enterprises operated by state-owned capital management companies. —— Led by Chengtong Holding Group Co., Ltd., and in collaboration with the Postal Savings Bank of China, China Merchants Group, China North Industries Group Corporation, Sinopec, Shenhua Group, China Mobile, China Railway Rolling Stock Corporation, China Communications Construction Company, and Beijing Financial Street Investment (Group) Co., Ltd., the fund has been jointly established. The primary mission of the China State-owned Enterprises Structural Adjustment Fund is to support supply-side structural reform, assist state-owned enterprises in key industries to carry out industry consolidation and specialized restructuring, and promote the transformation, upgrading, quality enhancement, efficiency improvement, and strengthening of state-owned enterprises.

　　The fund will focus its investments on four key areas:

　　First, the field of strategic investment. The fund will focus its investments on major projects and foundational scientific research in critical sectors and key areas that are vital to national security and closely linked to the lifeline of the national economy—such as defense industry and military-industrial complex, strategic material reserves, trunk pipelines for oil and natural gas, power grids, telecommunications infrastructure, and the development and utilization of strategic mineral resources. The investment strategy involves supporting central enterprises in implementing investment projects in these sectors, with a particular emphasis on meeting the investment needs of the project leaders. The fund will provide flexible and diversified financing support and aim to achieve relatively stable investment returns. For instance, the fund may consider acquiring stable dividend and interest income through preferred shares or debt instruments, while also planning for a relatively long-term investment holding period. In particular, for major strategic investment projects that serve the national interest, the fund does not rule out adopting a long-term, strategic holding approach.

　　Second, the field of transformation and upgrading. The fund will serve as a platform and a bridge, facilitating the alignment of high-quality assets and technologies from traditional industries with those in strategic emerging industries, consumption upgrade sectors, and the elderly care and health industries through mergers and acquisitions as well as restructuring. This will help promote the transformation and upgrading of central enterprises. The fund will also foster the reorganization and integration of leading industrial groups with research institutions, intensifying joint development efforts in new technologies, new products, and new markets. Furthermore, it will establish financial platforms to support enterprise transformation and upgrading, as well as international capacity cooperation platforms. Leveraging fluctuations in global economic cycles, the fund will pursue investment and acquisition opportunities in global resources and superior production capacities. As for its investment strategy, for domestic and overseas target companies that possess strong technological capabilities, innovative business models, and advantageous resource endowments, the fund may consider conducting equity acquisitions either independently or in collaboration with relevant central enterprises.

　　Third, the field of mergers and acquisitions and restructuring. Focus will be placed on fostering strong alliances among central enterprises in sectors such as equipment manufacturing, construction engineering, power generation, iron and steel, nonferrous metals, shipping, building materials, tourism, and aviation services. We will promote the integration of industrial chains among leading central enterprises in fields like coal, power, and metallurgy, thereby building competitive advantages across the entire value chain. Furthermore, we will facilitate specialized restructuring and integration among central enterprises in sectors including telecommunications, power, automotive, oil and gas pipelines, offshore engineering equipment, and air cargo transportation. In particular, we will provide strong support for mergers and acquisitions—both domestically and internationally—undertaken by leading central enterprises to acquire critical technologies, strategic resources, renowned brands, and market channels, thus nurturing a group of world-class multinational corporations with innovative capabilities and international competitiveness. As for our investment strategy, the fund will collaborate closely with industry-leading central enterprises in these sectors to jointly implement M&A and restructuring projects. The fund will primarily engage in financial investments, focusing on providing funding, professional consulting, and network resources to support industry integrators.

　　Fourth, the field of asset management. Focus on supporting industries with overcapacity, such as steel, coal, electrolytic aluminum, and cement. “ Reduce overcapacity ”， “ Zombie enterprise ” The disposal of inefficient and ineffective assets, as well as the exit from low-efficiency businesses and assets that lack complementarity and synergy with the core businesses of central enterprises.

　　The China State-owned Enterprise Structural Adjustment Fund is characterized by diversified funding sources, concentrated investment directions, market-oriented operations, and professional management. The fund adopts the organizational structure of a joint-stock company and establishes a standardized corporate governance framework. It has a shareholders’ meeting, a board of directors, and a supervisory board, which review and decide on major fund matters and oversee the fund’s operations. The State-owned Assets Supervision and Administration Commission of the State Council has set up a fund coordination leading group to guide the fund’s work, ensure the implementation of national strategies, and coordinate relevant issues. The fund’s fundraising, investment, post-investment management, and exit procedures will be entrusted to Chengtong Fund Management Co., Ltd., which will carry out professional management.