Investing for Public Company Value Creation

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On February 17, a new directive was launched to enhance the quality of centrally controlled listed companies. This endeavor seeks to strengthen market capitalization management while supporting value investing, rational investment, and long-term investment, which are crucial for maintaining stability in the capital markets. In addition to these efforts, there is a strong emphasis on accelerating the digital transformation of state-owned enterprises through an action plan that involves AI technology.

The upcoming measures focus on solidifying the developmental foundation of central enterprises. It is essential to center development on enhancing internal value, ensuring that efficiency metrics are elevated in tandem with the accumulation of both internal and external assets. The goal is to synchronize short-term and long-term objectives, thereby achieving a value-creation-centered approach to development.

Central enterprises are expected to play a pivotal role in demonstrating and leading high-quality economic development within the national economy. The current economic landscape underscores the importance of expanding domestic demand, which is crucial for stabilizing economic growth and promoting an internal economic cycle. Expanding effective investment has emerged as a strategic initiative to bolster domestic demand and is seen as a critical move in this direction.

"Effective investment" is distinguished from blind speculation or indiscriminate funding approaches; rather, it requires strategic targeting and effectively utilizing policies associated with "New Infrastructure" and "New Consumption." These areas not only represent the direction of future economic growth but also play a significant role in driving industrial upgrades and innovation. By leveraging these policies, capital can be steered toward projects characterized by high growth potential and innovative capabilities, injecting fresh vigor into economic development.

Moreover, increasing investment in significant projects and key areas is pivotal for expanding effective investment. Major projects often entail large-scale investments with substantial ripple effects on the economy, rapidly generating jobs and stimulating growth. In contrast, key areas such as high-end manufacturing and emerging strategic industries are essential for enhancing the country’s core competitiveness. To facilitate the execution of these projects, inter-departmental cooperation must be strengthened, approval processes streamlined, and overall work efficiency improved to ensure timely, quality, and quantity-compliant project completion.

Investment must focus on technological attributes, technological value, and emerging sectors, in alignment with the trends of our era. With rapid technological advancements, innovation has transformed into a core component of economic development. Implementing critical projects aimed at reinforcing industrial chains will help improve the autonomy and control over key industries while enhancing China's voice within the global industrial chain. For instance, greater investment in the semiconductor sector's vital technology research and production can effectively address key issues within the chip industry, thus bolstering the overall competitiveness of the domestic semiconductor market.

In addition to expanding effective investment, continuously improving the quality of central enterprise-controlled publicly-listed companies is equally vital. These publicly-listed enterprises are fundamental actors in the capital market, and their quality directly influences the stability and health of the market. Enhancing market capitalization management is an important strategy for boosting the quality of centrally-controlled companies. Rather than simply striving for an increase in stock prices, it requires aligning market capitalization with the intrinsic value of the enterprise to achieve a reasonable match.

Supporting value investing, rational investing, and long-term investment encourages investors to adopt appropriate investment philosophies, steering clear of short-term market fluctuations and speculative activities. This not only maintains market stability but also ensures that companies receive steady financial support for long-term growth.

Many industry insiders believe that market capitalization management will remain a crucial focus for central enterprises in the upcoming years, targeting 2025 as a pivotal moment. The State-owned Assets Supervision and Administration Commission (SASAC) is actively promoting the importance of market capitalization management within state enterprises, a strategic move with expansive implications. Some central enterprises have already established market capitalization management systems, paving the way for fruitful explorations and practices that provide valuable references for other state enterprises.

Emphasizing a scientific approach to market capitalization management will prompt central enterprises to consider various facets such as development planning, operational performance, and market image from a strategic standpoint. By optimizing corporate governance structures, enhancing information disclosure, and elevating brand value, the drive for increasing enterprise value can be furthered. For example, strengthening technological innovation can enhance core competitiveness, subsequently improving profitability and market valuation. Additionally, fulfilling social obligations becomes essential to build a positive corporate image, thus bolstering investor confidence.

To sum up, maximizing the demonstration effect of central enterprises while simultaneously expanding effective investments and enhancing the quality of listed companies is indispensable for propelling China’s high-quality economic growth and stabilizing the capital markets. As policies and strategies continue to unfold, central enterprises are poised to play an increasingly significant role in the national economy, ultimately contributing to the sustainable development of the country's economy.

In a recent report by China International Capital Corporation (CICC), it was indicated that addressing structural valuation issues faced by some centrally-controlled listed firms can be achieved by incorporating market capitalization management into the performance evaluations of central enterprise leaders.

The implementation of the “AI+” strategy is expected to expedite digital transformation within state-owned enterprises. The initiative highlights the importance of enhancing quality in crucial industries, particularly focusing on modernizing manufacturing. By implementing a digital transformation action plan rooted in AI technologies, state-owned enterprises aim to embark on a journey towards quality upgrades, emphasizing renewable resource use, and advanced production methods.

Recently, several central enterprises from diverse sectors including telecommunications, automotive, and energy have announced their engagement with DeepSeek, emphasizing the depth of development within the “AI+” strategy.

A research report from CHINA MERCHANTS SECURITIES CO., LTD. has highlighted that since the beginning of 2024, the “AI+” strategy for state-owned enterprises is geared towards accelerating empowerment in key sectors by emphasizing "application-driven technology" approaches. State-owned enterprises already have a certain degree of experience in applying artificial intelligence, which underpins their current swift integration of the DeepSeek model.

"The execution of the 'AI+' strategy and digital transformation reflects state-owned enterprises' critical steps toward leveraging technological innovation for market-oriented reform," commented researcher Zhou Lisha from the China Enterprise Reform and Development Research Association. There is optimism surrounding future acceleration in the adoption of AI large models within central enterprises, which can drive industry revolution and advancement.

Looking further ahead, reports suggest that indigenous large models like DeepSeek may synergize with the data advantages of central enterprises, expediting AI application implementations and innovating business models. This shift is poised to fundamentally reshape the developmental momentum and competitive advantages of these enterprises.

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