Strategic Assets: The Role of State-Owned Enterprises in Advancing China’s National and Global Economic Goals

Abstract

This chapter explores the critical role of State-Owned Enterprises (SOEs) in China's strategic sectors, particularly energy, telecommunications, and technology. It analyzes the government-led reforms that foster competition and encourage private investment, reshaping China's energy landscape with notable growth in renewable energy and technological advancement. SOEs have also expanded globally, with companies like CNPC and Sinopec spearheading international ventures in energy-rich regions. China's SOEs, such as China Mobile and China Telecom, lead global 5G development, AI, and digital infrastructure in telecommunications. The chapter highlights how these SOEs are aligned with China's national strategic goals, including the Belt and Road Initiative and the "Dual Circulation" strategy.

Introduction

In China's economic revolution, State-Owned Enterprises (SOEs) have been indispensable to the country's development, particularly in strategic sectors such as energy, telecommunications, and technology. Over the past decades, SOEs have transformed from being solely state-driven entities to dynamic players in global markets, driven by reforms that opened sectors to private and foreign investments. Chapter 8 of the book "China's Economic Revolution: The Convergence of Policy, Innovation, and Global Integration" focuses on the role of SOEs in these strategic industries. The chapter examines how reforms in energy and telecommunications have spurred competition, innovation, and international expansion. It also emphasizes the alignment of SOEs with China's national strategies like the Belt and Road Initiative (BRI) and "Dual Circulation," which emphasize domestic resilience and global engagement. Through this lens, the chapter assesses SOEs' global impact and contributions to China's ambitions of becoming a world leader in high-tech industries.

Keywords: 5G Network, Artificial Intelligence (AI), Belt and Road Initiative (BRI), China Mobile, China National Offshore Oil Corporation (CNOOC), China National Petroleum Corporation (CNPC), China Telecom, China Unicom, Digital Silk Road, Dual Circulation Strategy, Made in China 2025, Renewable Energy, Sinopec, State-Owned Enterprise (SOE), Telecommunications, Technological Innovation

A. SOEs in Energy and Natural Resources

China's energy and natural resource sectors have long been dominated by large State-Owned Enterprises (SOEs) such as the China National Petroleum Corporation (CNPC) and Sinopec. Historically, these entities held monopolistic control over exploration, production, and distribution, contributing significantly to national energy security. However, inefficiencies and limited innovation prompted the government to introduce market reforms, opening the sector to private and foreign investments. These reforms aimed to reduce overreliance on state control and promote competition, reshaping China's energy landscape and enhancing efficiency (NDRC & MNR, 2020; CNPC, 2021).

1. Reforms in the Energy Sector Focusing on Opening Up to Private Investment and Promoting Competition

China's energy sector has historically been dominated by large State-Owned Enterprises (SOEs), such as the China National Petroleum Corporation (CNPC), China Petrochemical Corporation (Sinopec), China National Offshore Oil Corporation (CNOOC), and the State Grid Corporation of China. These SOEs have held monopolistic control over vast parts of the energy supply chain, from oil exploration to electricity distribution. However, over time, the Chinese government has recognized the inefficiencies associated with this heavy reliance on state control, including overcapacity and sluggish innovation. As a result, various reforms have been introduced to open the energy sector to private and foreign investments while promoting greater competition among state-owned and private firms. This section explores the key initiatives and reforms that have reshaped China's energy landscape and assesses their impact on the market and competitiveness.

Opening Up to Private Investment

One of China's energy sector's most significant reform areas has been the gradual opening up to private and foreign investment. Historically, SOEs maintained exclusive control over key energy resources. However, the government's recent reforms aim to promote mixed-ownership models, reduce the state's financial burden, and introduce market-driven incentives to the industry.

A crucial milestone in this process was the 2020 program initiated by the National Development and Reform Commission (NDRC) and the Ministry of Natural Resources (MNR), which allowed private firms to bid for oil and gas exploration rights. This marked a shift away from the monopolistic control of CNPC, Sinopec, and CNOOC, fostering competition and boosting investment, especially in underexplored regions like western China and offshore areas (NDRC & MNR, 2020).

Table 1: Growth of Private Participation in China's Oil & Gas Sector (2015–2025)

Year

Number of Private Firms Granted Oil & Gas Exploration Rights

Private Sector Share of Oil Production (%)

2015

12

2.5

2020

35

5.2

2025*

50 (projected)

10.5 (projected)

Source: NDRC, 2020

Table 1 highlights the significant increase in private firms granted oil and gas exploration rights from 2015 to 2020, with projections for continued growth by 2025. This increase in private sector participation, from 2.5% of oil production in 2015 to an anticipated 10.5% by 2025, illustrates the success of government reforms in breaking down SOE monopolies and encouraging greater market diversity (NDRC, 2020).

Another key reform has occurred in the renewable energy sector, where private investments have become increasingly important. China has committed to increasing the share of renewable energy in its energy mix, and private companies have been encouraged to invest in wind, solar, and hydropower projects. This push aligns with China's broader environmental goals, such as achieving peak carbon emissions by 2030 and carbon neutrality by 2060.

Table 2: Private Sector Investment in Renewable Energy in China (2015–2025)

Year

Private Investment in Renewable Energy (Billion USD)

Share of Renewable Power Generation by Private Firms (%)

2015

15.3

18.5

2020

28.7

25.7

2025*

50.1 (projected)

35.0 (projected)

Source: Ministry of Energy, 2021

Table 2 demonstrates the rapid growth of private sector investment in China's renewable energy sector between 2015 and 2020, with projections showing further expansion by 2025. The increase in private investment from USD 15.3 billion in 2015 to an anticipated USD 50.1 billion by 2025 reflects the success of China's market reforms in renewable energy. The corresponding rise in the share of renewable power generation by private firms from 18.5% to a projected 35% also signals a shift towards a more competitive, private-sector-driven energy market (Ministry of Energy, 2021).

A notable example of the success of these reforms is the case of Longi Green Energy Technology Co., Ltd., a private company that has thrived in the renewable energy space. Longi, founded in 2000, has leveraged domestic reforms and global demand to become the world's largest producer of solar panels.

Table 3: Longi Green Energy's Growth in China's Solar Industry (2015–2025)

Year

Longi Solar Panel Production (GW)

Market Share in China's Solar Industry (%)

2015

6.0

12.3

2020

20.6

23.5

2025*

30.0 (projected)

30.0 (projected)

Source: Longi Green Energy Technology Co., Ltd., 2020

Table 3 shows Longi Green Energy's remarkable growth in solar panel production from 6.0 GW in 2015 to 20.6 GW in 2020, with a projected increase to 30 GW by 2025. This growth reflects the effectiveness of China's energy reforms in fostering innovation and expanding the role of private enterprises in the renewable energy sector. Longi's increasing market share in China's solar industry, from 12.3% to a projected 30% by 2025, highlights the competitive edge that private firms are gaining in the energy transition (Longi et al., 2020).

Promoting Competition

Alongside opening the energy sector to private investment, the Chinese government has initiated reforms to promote competition, particularly within the SOEs. Historically, each SOE operated as a monopoly in its specific segment—CNPC and Sinopec in oil, CNOOC in offshore energy, and State Grid in electricity distribution. The government's new policies are designed to encourage competition within and across these segments, thereby improving efficiency and lowering costs.

One example of these reforms is introducing internal competition in the oil and gas sector. CNPC, Sinopec, and CNOOC now compete for upstream oil and gas projects rather than having exclusive territories, fostering innovation and efficiency.

Table 4: Shifts in Market Share Among Major SOEs in China's Oil Sector (2010–2020)

Year

CNPC Market Share in Oil Production (%)

Sinopec Market Share in Oil Production (%)

CNOOC Market Share in Oil Production (%)

2010

58.3

32.4

9.3

2015

55.0

34.2

10.8

2020

52.0

36.5

11.5

Source: CNPC Annual Report, 2021

Table 4 shows the gradual reduction in CNPC's market share from 58.3% in 2010 to 52.0% in 2020, while Sinopec and CNOOC have experienced modest gains. These shifts suggest that introducing competition within the SOE sector has allowed companies like Sinopec and CNOOC to expand their operations and increase efficiency, fostering a more competitive and innovative environment within the energy industry (CNPC, 2021).

The government has introduced competitive bidding for power generation contracts in the electricity market. Independent power producers (IPPs) can now compete with state-owned power plants for electricity contracts, which is expected to reduce electricity prices and encourage the development of more efficient and cleaner energy sources.

Challenges to Competition

While the reforms have been promising, significant challenges remain in fully liberalizing China's energy sector. Private firms often need help to compete with entrenched SOEs that continue to benefit from political backing, preferential access to resources, and favorable financing terms. Regulatory barriers, complex approval processes, and other institutional hurdles still limit the ability of private firms to operate on an equal footing with SOEs. However, the Chinese government has reiterated its commitment to further market reforms, as outlined in the 14th Five-Year Plan (2021-2025), particularly in renewable energy and natural gas (NDRC, 2020).

Conclusion

China's energy sector is undergoing a significant transformation, driven by government reforms to reduce SOE dominance, increase private participation, and promote competition. These efforts are reshaping the market dynamics, encouraging greater efficiency and innovation. While challenges remain, particularly in ensuring a level playing field for private firms, the success of companies like Longi Green Energy exemplifies the potential for growth in a more competitive and diversified energy market. As China continues to modernize its energy infrastructure, the role of private firms and competitive forces will be critical in achieving its long-term energy security and sustainability goals.

2. Case Studies of Major State-Owned Players Like CNPC and Sinopec and Their International Expansion Strategies

China's State-Owned Enterprises (SOEs) in the energy sector, especially China National Petroleum Corporation (CNPC) and China Petroleum & Chemical Corporation (Sinopec) have played a crucial role in advancing China's national energy security and expanding the country's global footprint in the oil and gas industry. Over the years, these SOEs have strategically invested in foreign markets to secure access to vital resources and enhance their technological and operational capabilities. This section examines the international expansion strategies of CNPC and Sinopec, focusing on key case studies from Kazakhstan, Iraq, Angola, and Brazil. These case studies illustrate how China's energy SOEs have navigated geopolitical landscapes to establish a significant global presence.

2.1. China National Petroleum Corporation (CNPC)

China National Petroleum Corporation (CNPC) is one of the world's largest integrated oil and gas companies. Established in 1988, CNPC is critical in ensuring China's energy security by operating across the entire oil and gas value chain—from upstream exploration to downstream refining and distribution. As domestic energy consumption grew, so did China's reliance on imported oil, driving CNPC to expand aggressively into foreign markets. This international expansion is focused on securing long-term energy supplies, achieving vertical integration, and forming strategic partnerships with foreign companies and governments.

CNPC's global expansion can be best understood through its operations in regions rich in energy resources, such as Central Asia and the Middle East. The company's investments in these regions reflect its broader strategy to enhance China's energy security by diversifying oil supply sources and creating stable, long-term partnerships.

Case Study: CNPC in Kazakhstan

Kazakhstan has become one of CNPC's most significant international ventures. CNPC entered Kazakhstan in the 1990s and has since expanded its operations through various investments and joint ventures. By 2018, CNPC had become one of the largest foreign investors in Kazakhstan's oil sector, controlling several major oil fields, including the Aktobe and Zhanazhol fields, through its subsidiary CNPC-AktobeMunaiGas.

These investments align with China's Belt and Road Initiative (BRI), which promotes infrastructure and energy projects that strengthen connectivity between China and Central Asia. A key component of CNPC's strategy is the China-Kazakhstan Oil Pipeline, which facilitates oil transport from Kazakhstan to China, reducing China's reliance on more volatile energy sources in the Middle East. This project highlights how commercial goals and broader national energy security objectives drive CNPC's investments.

Table 5: CNPC's Investments and Oil Production in Kazakhstan (2010–2020)

Year

CNPC Investment in Kazakhstan (Billion USD)

Oil Production (Million Barrels per Day)

Share of Kazakhstan's Oil Production Controlled by CNPC (%)

2010

6.5

0.4

14

2015

8.2

0.5

16

2020

10.3

0.55

18

Source: CNPC Annual Report, 2021

Table 5 demonstrates CNPC's growing influence in Kazakhstan's oil industry, with investments increasing from USD 6.5 billion in 2010 to USD 10.3 billion in 2020. Over the same period, CNPC's share of Kazakhstan's oil production rose from 14% to 18%, illustrating how the company has consolidated its position as a major player in the country's energy sector. This highlights the strategic importance of CNPC's investments in securing China's long-term energy supply, particularly through projects tied to the Belt and Road Initiative (CNPC, 2021).

Case Study: CNPC in Iraq

CNPC's expansion into Iraq has also been critical to its international strategy. With its vast oil reserves, Iraq represents a key part of China's energy security ambitions. CNPC has made significant investments in several large oil fields in Iraq, most notably the Rumaila and Halfaya fields. The Rumaila oil field, operated in partnership with BP, is one of the largest in the world, with a production capacity exceeding 1.5 million barrels per day.

CNPC's involvement in Iraq reflects the company's ability to navigate complex geopolitical environments to secure essential energy resources for China. Despite the ongoing political instability and security challenges in Iraq, CNPC has remained steady, contributing to Iraq's oil production and strengthening China's energy security by ensuring a stable supply of crude oil from this region.

Table 6: CNPC's Investments and Oil Production in Iraq (2010–2020)

Year

CNPC Investment in Iraq (Billion USD)

Oil Production from Iraqi Fields (Million Barrels per Day)

2010

5.0

0.6

2015

6.8

0.9

2020

9.2

1.3

Source: CNPC Annual Report, 2021

Table 6 shows the steady increase in CNPC's investments in Iraq, rising from USD 5.0 billion in 2010 to USD 9.2 billion in 2020. Over the same period, oil production from CNPC-operated fields increased from 0.6 million barrels per day to 1.3 million barrels per day. This demonstrates CNPC's growing role in Iraq's oil sector despite the volatile political and security situation. CNPC's ability to maintain and expand operations in Iraq underscores the strategic importance of its regional investments (CNPC, 2021).

2.2. Sinopec (China Petroleum & Chemical Corporation)

Sinopec, another of China's leading SOEs, differs from CNPC's focus on downstream operations such as refining, petrochemicals, and distribution. However, it has also recently expanded into upstream oil exploration and production. Sinopec's international strategy aims to diversify its energy sources and enhance its presence in global oil and gas markets.

Sinopec has pursued an aggressive international expansion strategy, acquiring oil and gas assets in Africa and Latin America. Sinopec has gained access to significant oil fields through joint ventures and acquisitions while investing in petrochemical production facilities abroad to strengthen its global market position.

Case Study: Sinopec in Angola

Angola, one of Africa's largest oil producers, has been a focal point for Sinopec's investments. Sinopec's joint venture with Sonangol, the Angolan state-owned oil company, has established a substantial foothold in Angola's oil industry. Sinopec has significantly invested in offshore oil fields, contributing to stable supply and solidifying Angola as one of China's key energy partners.

Sinopec's presence in Angola also highlights the importance of Sino-African partnerships in China's broader energy strategy. By investing in Angola's energy sector, Sinopec secures valuable oil resources and strengthens China's diplomatic and economic ties with Africa.

Table 7: Sinopec's Investments and Oil Production in Angola (2010–2020)

Year

Sinopec Investment in Angola (Billion USD)

Oil Production (Million Barrels per Day)

2010

4.3

0.4

2015

5.7

0.5

2020

7.0

0.6

Source: Sinopec Annual Report, 2021

Table 7 illustrates Sinopec's expanding role in Angola's oil sector, with investments increasing from USD 4.3 billion in 2010 to USD 7.0 billion in 2020. Over the same period, Sinopec's oil production in Angola grew from 0.4 million barrels per day to 0.6 million barrels per day. This steady growth reflects Sinopec's success in building strong partnerships with local entities and contributing to Angola's energy output (Sinopec, 2021).

Case Study: Sinopec in Brazil

In Latin America, Sinopec's acquisition of a 40% stake in Repsol's Brazilian operations in 2010 was a key move in expanding its presence in one of the world's most promising offshore oil regions. The acquisition gave Sinopec access to the Santos Basin, a rich offshore oil field with significant production potential.

Brazil represents an important part of Sinopec's global diversification strategy, allowing it to secure access to oil outside the volatile Middle East. This move also underscores Sinopec's broader efforts to expand its presence in the global oil market through strategic investments and partnerships in key energy-producing regions.

Table 8: Sinopec's Investments and Oil Production in Brazil (2010–2020)

Year

Sinopec Investment in Brazil (Billion USD)

Oil Production from Brazilian Fields (Million Barrels per Day)

2010

7.1

0.2

2015

9.4

0.35

2020

11.2

0.5

Source: Sinopec Annual Report, 2021

Table 8 shows Sinopec's growing investment in Brazil's oil sector, rising from USD 7.1 billion in 2010 to USD 11.2 billion. Sinopec's oil production from Brazilian fields increased from 0.2 million barrels per day in 2010 to 0.5 million in 2020. This growth highlights Sinopec's successful integration into Brazil's oil industry, particularly its access to the highly productive Santos Basin. Sinopec's strategy in Brazil diversifies its global oil supply and solidifies its presence in Latin America. This region has become increasingly important in China's broader energy strategy (Sinopec, 2021).

Conclusion

The international expansion strategies of China's leading SOEs, CNPC and Sinopec, reflect China's broader energy security and economic goals. Both companies have leveraged state support and access to capital to invest in key energy-producing regions worldwide, securing long-term energy supplies and expanding their operational capabilities. CNPC's focus on Central Asia and the Middle East and Sinopec's investments in Africa and Latin America illustrate these SOEs' complementary roles in enhancing China's global energy footprint.

CNPC's investments in Kazakhstan and Iraq underscore its strategic approach to securing oil and gas supplies from politically significant regions. At the same time, Sinopec's ventures in Angola and Brazil reflect a diversification strategy to reduce dependency on traditional oil-producing regions like the Middle East. These investments contribute to China's energy security and position these SOEs as major players in the global energy market.

By analyzing these case studies, it becomes evident that China's SOEs are not just commercial entities but instruments of national policy tasked with securing vital resources and enhancing China's influence on the global stage. However, these strategies are not without challenges, including geopolitical risks, operational complexities in foreign markets, and environmental concerns. Nevertheless, CNPC and Sinopec play a pivotal role in China's international energy strategy, demonstrating the country's ability to navigate the global energy landscape through state-backed enterprises.

B. Telecommunications and Technology Sectors

China's telecommunications and technology sectors have been spearheaded by three major State-Owned Enterprises (SOEs): China Mobile, China Telecom, and China Unicom. These companies have dominated the domestic telecommunications market and led innovations in 5G, cloud computing, and artificial intelligence (AI). Backed by government support, these SOEs have played a crucial role in advancing China's global digital infrastructure and technology leadership. Their contributions to next-generation technology have positioned China as a key player in the global digital economy, driving domestic growth and international competitiveness (MIIT, 2021; China Mobile, 2021).

1. Exploration of SOEs' Leadership in China's Telecommunications Industry, Including 5G and Digital Infrastructure

China's telecommunications sector has long been dominated by three major State-Owned Enterprises (SOEs): China Mobile, China Telecom, and China Unicom. Together, these entities control most of the telecommunications market, providing essential services to the country's 1.4 billion people. In addition to their dominance in traditional telecommunications services, such as mobile and broadband networks, these SOEs are developing next-generation digital infrastructure, including 5G networks, cloud computing, and artificial intelligence (AI). Through substantial government support and strategic investments, China's telecommunications SOEs are at the forefront of the country's efforts to become a global leader in digital infrastructure. This section explores how these SOEs have led the development of 5G networks and digital infrastructure domestically and globally.

China's Telecommunications SOEs: A Dominant Force

The three major SOEs—China Mobile, China Telecom, and China Unicom—have maintained overwhelming control of the telecommunications market in China. Their leadership spans key areas such as mobile communications, broadband services, and the rapidly growing digital infrastructure space, which includes cloud computing, AI applications, and big data. These companies' vast resources and state backing have enabled them to make significant investments to develop cutting-edge technology such as 5G.

In 2020, these SOEs controlled over 95% of China's telecommunications market, including mobile communications and broadband. This dominance has allowed them to take on large-scale national projects, such as building the infrastructure required to roll out 5G networks. These are essential to China's broader technological leadership and economic modernization goals.

Table 9: Market Share and 5G Base Station Deployment by China's Telecommunications SOEs (2020)

Company

Total Revenue (Billion USD, 2020)

Market Share in Mobile Communications (%)

Number of 5G Base Stations (2020)

China Mobile

118.9

59.5

460,000

China Telecom

57.2

21.6

240,000

China Unicom

43.7

18.9

200,000

Source: Ministry of Industry and Information Technology (MIIT), 2021

Table 9 provides an overview of the market dominance and revenue of China's three leading telecommunications SOEs. China Mobile, the largest, holds nearly 60% of the market and has deployed 460,000 5G base stations by 2020. While smaller, China Telecom and China Unicom also play critical roles in the country's 5G infrastructure development, contributing 240,000 and 200,000 base stations, respectively. This data highlights the centralized and resource-intensive nature of 5G deployment in China, where a few SOEs lead the charge.

5G Leadership: A Key Component of China's Digital Ambition

The development of 5G technology has become one of the cornerstones of China's digital strategy, contributing to the country's aim to lead in global telecommunications innovation. By the end of 2020, China had installed over 700,000 5G base stations, accounting for more than 70% of the global total (MIIT, 2021). The deployment of 5G is aimed at providing faster internet speeds for consumers and creating a digital ecosystem where technologies such as the Internet of Things (IoT), smart cities, autonomous vehicles, and AI can thrive.

The development and rollout of 5G networks have been driven primarily by China Mobile, China Telecom, and China Unicom, with significant government backing. These companies have collaborated closely with domestic technology firms like Huawei and ZTE, ensuring China remains a global leader in 5G infrastructure and services.

Figure 1: Growth in 5G Deployment and Subscribers in China (2019-2021)

Year

5G Base Stations (Thousands)

5G Subscribers (Millions)

2019

130

110

2020

700

260

2021

1,200

650

?

Source: MIIT, 2021

Figure 1 illustrates the exponential growth in China's 5G base stations and subscribers between 2019 and 2021. The number of base stations grew from 130,000 in 2019 to 1.2 million by 2021, while 5G subscribers increased from 110 million to 650 million during the same period. This rapid deployment highlights the scale and pace of China's 5G rollout, which has positioned the country as a global leader in telecommunications infrastructure (MIIT, 2021).

Case Study: China Mobile and 5G Development

China Mobile, the largest telecommunications SOE, has been leading in developing the country's 5G network. In 2020, China Mobile deployed approximately 460,000 5G base stations and had over 170 million 5G subscribers, making it the world's largest operator of 5G networks by both infrastructure and user base (China Mobile, 2021).

China Mobile's partnerships with leading technology companies, including Huawei, have rapidly deployed 5G networks across China. These partnerships have supported various initiatives, such as smart city infrastructure, autonomous transportation systems, and industrial IoT applications. For example, in Shenzhen, China Mobile and Huawei collaborated to build a comprehensive 5G network that underpins the city's smart transportation system, which includes AI-driven traffic management and autonomous buses.

Table 10: China Mobile's 5G Subscriber Growth and Revenue (2019–2021)

Year

5G Subscribers (Millions)

5G Revenue (Billion USD)

2019

50

3.5

2020

170

7.8

2021*

240 (estimated)

12.0 (estimated)

Source: China Mobile Annual Report, 2021

Table 10 shows China Mobile's substantial 5G subscribers and revenue growth between 2019 and 2021. The number of subscribers tripled from 50 million in 2019 to 170 million in 2020, with projected growth to 240 million by 2021. Correspondingly, revenue from 5G services more than doubled between 2019 and 2020. These figures underscore the financial and strategic importance of 5G to China Mobile's business model and its role in China's digital transformation (China Mobile, 2021).

Digital Infrastructure: Expanding China's Global Digital Footprint

In addition to leading 5G deployment, China's telecommunications SOEs have been crucial in expanding the country's global digital footprint through initiatives such as the Digital Silk Road. This Belt and Road Initiative (BRI) component focuses on building digital infrastructure, such as fiber-optic networks, satellite communications, and data centers, across developing countries in Africa, Asia, and beyond. China Telecom and China Unicom, in particular, have been leading players in establishing digital connectivity in BRI partner countries.

China Telecom, for example, has significantly expanded its cloud computing services and data centers domestically and internationally. In 2020, the company launched new data centers in Pakistan and Kenya, enhancing global connectivity and supporting China's broader diplomatic and economic interests. These investments provide the infrastructure for digital services, allowing Chinese tech companies to expand their global influence.

Table 11: China Telecom's International Data Center Expansion and Revenue (2018–2022)

Year

Data Centers Abroad

International Revenue (Billion USD)

2018

10

2.1

2020

18

3.4

2022*

25 (projected)

4.8 (projected)

Source: China Telecom Annual Report, 2021

Source: China Telecom Annual Report, 2021

Table 11 highlights the expansion of China Telecom's international data center footprint, growing from 10 centers in 2018 to 18 in 2020, with projections of 25 by 2022. This expansion corresponds with a steady increase in international revenue, indicating that China Telecom's global digital infrastructure projects are both commercially successful and geopolitically significant, supporting China's goal of becoming a global digital leader (China Telecom, 2021).

Case Study: China Unicom's Digital Silk Road Projects

China Unicom has also been an integral part of China's efforts to build global digital infrastructure. One of its flagship projects under the Digital Silk Road is the Pakistan-East Africa Cable Express (PEACE), a submarine cable that connects China with Pakistan, Kenya, and beyond. This project aims to improve internet connectivity in Africa and South Asia, supporting the growth of the digital economy in these regions. By building this critical infrastructure, China Unicom enhances China's influence in these developing regions, paving the way for expanding Chinese technology platforms and services.

Table 12: China Unicom's PEACE Submarine Cable Expansion (2020–2022)

Year

Length of PEACE Submarine Cable (km)

Capacity (Tbps)

2020

12,000

60

2022*

15,000 (expected)

100 (expected)

Source: China Unicom Annual Report, 2021

Table 12 shows the expansion of the Pakistan-East Africa Cable Express (PEACE) submarine cable project led by China Unicom. By 2020, the cable spanned 12,000 kilometers with a capacity of 60 terabits per second (Tbps). The projected expansion to 15,000 kilometers and an increased capacity of 100 Tbps by 2022 highlight this infrastructure project's growing scale and importance. The PEACE cable is a critical component of China's efforts to enhance global digital connectivity, particularly in Africa and South Asia, strengthening China's influence in these strategically important regions (China Unicom, 2021).

China's Telecommunications SOEs and Global Digital Leadership

China's telecommunications SOEs' leadership role in domestic and international digital infrastructure development positions China as a central player in the global digital economy. The strategic investments in 5G, cloud computing, and international connectivity projects like the PEACE cable demonstrate China's ambition to be a global leader in the digital space. Expanding telecommunications infrastructure through projects like the Digital Silk Road has provided essential services to developing nations and enhanced China's influence in these regions.

China's dominance in 5G infrastructure is another key aspect of its global digital leadership. With over 1.2 million 5G base stations by 2021, China has established itself as the world's largest 5G network operator. These efforts are central to the country's broader ambitions under initiatives like Made in China 2025, which aims to make China a global leader in advanced technology, including AI, IoT, and digital infrastructure.

Challenges and Opportunities Ahead

Despite the impressive achievements of China's telecommunications SOEs, they face several challenges, particularly on the international stage. Geopolitical tensions, particularly with the United States and European Union, have increased scrutiny of Chinese telecommunications companies, especially about data security, privacy, and concerns about the potential for espionage. Huawei and ZTE, for example, have faced significant restrictions in many countries, especially in deploying 5G technology.

Moreover, as China's SOEs expand their influence through international projects, they face operational and regulatory challenges in foreign markets. While initiatives like the Digital Silk Road provide opportunities for deeper engagement in developing regions, they also require careful management of local political and regulatory landscapes. As countries become more cautious about foreign influence over critical digital infrastructure, China's SOEs may need to enhance transparency and engage in more collaborative, multilateral approaches to address these concerns.

Conclusion

China's telecommunications SOEs—China Mobile, China Telecom, and China Unicom—have played a central role in transforming the country into a global leader in digital infrastructure. Their dominance in the domestic market, combined with their ambitious international projects, has positioned China as a driving force in the global 5G and digital economy. As these SOEs continue to build advanced infrastructure at home and abroad, they are reshaping global telecommunications and influencing the direction of technological innovation.

However, geopolitical tensions and international scrutiny challenges must be carefully navigated. China's success in maintaining its global telecommunications and digital infrastructure leadership will depend on how effectively these SOEs can manage the complex interplay between technological advancements, regulatory environments, and international relations.

2. The Impact of Technology-Driven SOEs on China’s Ambitions for Global Competitiveness in High-Tech Industries

China's rise as a global leader in high-tech industries is largely driven by its state-owned enterprises (SOEs), which play a central role in technological innovation and industrial modernization. SOEs such as Huawei, ZTE, China Mobile, and other key players are at the forefront of technological advancement, particularly in critical sectors like 5G, artificial intelligence (AI), semiconductors, and cybersecurity. These technology-driven SOEs have benefited from substantial state support, enabling them to pioneer research and development (R&D) efforts that have positioned China as a formidable competitor in the global high-tech landscape. This section examines the role of these SOEs in enhancing China's global competitiveness in high-tech industries. It analyzes their contribution to the country's broader economic restructuring, innovation, and global integration goals.

Technology-Driven SOEs: Catalysts for Innovation and Competitiveness

China's technology-driven SOEs have been instrumental in advancing the country's ambitions to lead in cutting-edge technologies. Backed by government policies prioritizing technological self-sufficiency, SOEs have invested heavily in R&D and formed strategic alliances with global firms to enhance their capabilities. For example, companies like Huawei and ZTE have made significant advancements in 5G technology, enabling China to compete with technology giants in the U.S., South Korea, and Europe.

As a result, China's SOEs have played a crucial role in the country's drive to dominate the global high-tech market. These enterprises have leveraged their access to state-backed resources to build global partnerships, acquire advanced technologies, and expand their influence in key industries. The Chinese government's emphasis on fostering innovation through SOEs aligns with its broader economic strategies, such as the Made in China 2025 initiative, which aims to establish China as a high-tech manufacturing and innovation leader.

5G Leadership and Global Influence

China's leadership in 5G technology is a prime example of how its SOEs drive the country's global competitiveness. Companies like Huawei and ZTE, supported by China Mobile, have developed world-class 5G technologies that place China at the forefront of the global 5G race. Despite facing trade restrictions and political challenges, especially from the United States, Chinese SOEs have continued to lead the global deployment of 5G networks.

Figure 2: 5G Base Station Deployment by Country (2022)

Country

Number of 5G Base Stations (Millions)

Global Share (%)

China

2.3

60

United States

0.5

13

South Korea

0.2

5

Others

0.8

22

?

Source: China Academy of Information and Communications Technology (CAICT), 2023

Figure 2 shows that China accounted for 60% of global 5G base stations in 2022, vastly outpacing other countries such as the United States (13%) and South Korea (5%). This substantial lead in 5G infrastructure is largely attributable to the investments made by Chinese SOEs like Huawei and ZTE, which have spearheaded the deployment of 5G networks in China and abroad. China's overwhelming dominance in 5G base stations underscores its position as a global leader in this critical technology (CAICT, 2023).

Huawei, for instance, has been a key player in the global 5G market, securing over 90 commercial 5G contracts worldwide despite U.S. restrictions on its access to advanced semiconductor chips. The company has maintained its competitive edge through heavy investments in R&D and strong state backing. In 2020, Huawei allocated 15% of its annual revenue (USD 22 billion) to R&D, making it one of the highest R&D spenders globally (Huawei, 2021).

Table 13: Global 5G Base Station Deployment (2022)

Country

Number of 5G Base Stations (Millions)

Global Share (%)

China

2.3

60

United States

0.5

13

South Korea

0.2

5

Others

0.8

22

Source: CAICT, 2023

Table 13 provides a clearer breakdown of global 5G base station deployment. China's 2.3 million base stations in 2022 represent 60% of the global total, demonstrating the country's commitment to building the infrastructure necessary for advanced digital technologies. While significant players, the United States and South Korea trail far behind in absolute numbers and global Share. This disparity highlights China's aggressive push to lead the 5G revolution, a key pillar of its high-tech ambitions (CAICT, 2023).

AI and Big Data: Expanding Global Influence

In addition to 5G, China's SOEs have made significant strides in artificial intelligence (AI) and big data technologies. These technologies are crucial for future global competitiveness, particularly in autonomous vehicles, smart cities, and healthcare industries. China's AI development has been largely guided by its Next Generation Artificial Intelligence Development Plan (2017), which targets China to become the world leader in AI by 2030 (State Council, 2017).

Chinese SOEs, such as China Mobile and Baidu, have been heavily involved in developing AI platforms and big data analytics, critical to advancing AI technologies. China Mobile, for instance, has leveraged its vast user base and data infrastructure to build sophisticated AI-driven applications for smart city management, public health, and industrial automation.

Table 14: China's Investment in AI Technologies (2018–2022)

Year

AI Investment (Billion USD)

2018

12.5

2019

15.7

2020

18.2

2021

22.0

2022

25.6

Source: Ministry of Industry and Information Technology (MIIT), 2023

Table 14 illustrates the rapid growth of AI investments in China from 2018 to 2022. AI investments increased from USD 12.5 billion in 2018 to USD 25.6 billion in 2022, underscoring the strategic importance of AI to China's high-tech development goals. This surge in investment is largely driven by SOEs and state-backed initiatives that aim to enhance China's leadership in AI innovation and applications (MIIT, 2023).

One prominent example of China's AI innovation is Baidu's Apollo Project, an open-source autonomous driving platform. The Apollo Project, which has over 200 global partners, exemplifies China's ambitions to dominate the autonomous vehicle market—a market projected to be worth USD 173 billion by 2030 (Apollo et al., 2023).

Challenges to SOE-Led Technological Advancement

Despite the impressive progress made by China's technology-driven SOEs, significant challenges could hinder their continued global expansion. Trade restrictions, particularly from the U.S., have targeted key Chinese companies like Huawei, limiting their access to advanced semiconductor chips and other critical technologies. These restrictions have hampered the global competitiveness of Chinese SOEs in some areas, particularly semiconductors.

Additionally, concerns about data privacy, cybersecurity, and intellectual property rights have increased scrutiny of Chinese technology companies in international markets. As global regulatory frameworks evolve, China's SOEs must navigate complex international rules to maintain their competitive edge.

Conclusion

Technology-driven SOEs in China have been central to the country's rise as a global leader in high-tech industries. Through substantial investments in 5G, AI, and big data technologies, Chinese SOEs have positioned the country at the forefront of technological innovation. Companies like Huawei, ZTE, and China Mobile have led the global deployment of 5G networks, while SOEs like Baidu have pioneered advancements in AI and autonomous driving technologies.

While challenges remain, particularly in trade restrictions and geopolitical tensions, China's SOEs have demonstrated resilience and adaptability. The Chinese government's continued support for these enterprises and its strategic focus on technological self-reliance will likely ensure that China remains a key player in the global high-tech sector in the years to come.

C. SOEs and National Strategic Goals

In China, state-owned enterprises (SOEs) are central to achieving national strategic goals, aligning closely with the government's Five-Year Plans and key initiatives like the "Dual Circulation" strategy. SOEs drive economic modernization, technological self-sufficiency, and green development, especially in the energy, telecommunications, and infrastructure sectors. The 14th Five-Year Plan (2021-2025) emphasizes innovation and sustainability, with SOEs leading in areas like renewable energy and advanced manufacturing. Their role in fostering domestic growth while expanding global trade and investment underscores their importance to China's long-term economic strategy (SASAC, 2023; NDRC, 2023).

1. Alignment of SOEs with Government Priorities in the Five-Year Plans and Key Initiatives like the "Dual Circulation" Strategy

State-owned enterprises (SOEs) have been the cornerstone of China's economic development, which is critical in implementing national policies and driving economic growth. Over the decades, SOEs have been instrumental in executing the strategic goals laid out in the government's Five-Year Plans (FYPs), which outline China's socio-economic priorities and long-term vision. More recently, SOEs have been central to key national initiatives such as the "Dual Circulation" strategy, emphasizing the balance between domestic economic growth and international engagement. This section explores how SOEs have aligned with government priorities, contributed to technological independence, and supported economic restructuring while adapting to the changing global environment.

SOEs and China's Five-Year Plans: Policy-Driven Economic Transformation

China's Five-Year Plans have been the blueprint for the country's development since 1953. These plans offer a structured approach to addressing the country's economic, industrial, and social goals. SOEs have consistently been at the forefront of the government's efforts to transform and modernize key industries, particularly in strategic sectors such as energy, telecommunications, and infrastructure.

The most recent 14th Five-Year Plan (2021-2025) emphasizes innovation, technological self-reliance, green development, and the expansion of domestic markets. SOEs are expected to take the lead in these areas, focusing on advancing key technologies, improving efficiency, and supporting sustainable development initiatives. In this context, SOEs are instrumental in achieving China's vision of economic modernization, industrial upgrading, and global leadership in emerging industries such as artificial intelligence, clean energy, and advanced manufacturing.

Technological Independence and SOEs' Role

One of the key aspects of the 14th Five-Year Plan is the focus on technological self-sufficiency, particularly in response to global trade tensions and restrictions on access to foreign technology. The Chinese government has clarified that achieving independence in critical technologies—such as semiconductors, aerospace, and renewable energy—is essential to reducing reliance on imports and enhancing the country's long-term competitiveness.

SOEs, particularly in high-tech sectors, spearhead efforts to achieve breakthroughs in these strategic industries. For example, China National Petroleum Corporation (CNPC) has made significant advancements in energy technology, such as deep-water drilling and renewable energy projects, supported by government funding for research and development (CNPC, 2021).

Table 15: Key SOE Contributions to Technological Independence (2021–2023)

Year

SOE R&D Investment (Billion USD)

Major Technological Breakthroughs

Reduction in Foreign Technology Dependence (%)

2021

23.5

Deep-water drilling, proprietary AI systems

12

2022

25.8

Advanced semiconductors, renewable energy systems

18

2023*

30.2 (projected)

Quantum computing, aerospace technologies

22 (projected)

Source: CNPC Annual Report, 2021

Table 15 outlines the increasing investment by Chinese SOEs in research and development (R&D) to achieve technological independence. The rise in R&D investments from USD 23.5 billion in 2021 to a projected USD 30.2 billion in 2023 reflects the government's strategic focus on innovation-driven growth. This investment has led to breakthroughs in areas such as deep-water drilling and quantum computing, significantly reducing China's dependence on foreign technology by an estimated 22% by 2023 (CNPC, 2021).

Green Development and Energy Transition

Another key pillar of the 14th Five-Year Plan is the emphasis on green development. China has set ambitious targets for reducing carbon emissions and increasing the share of renewable energy in its energy mix. The government's commitment to achieving peak carbon emissions by 2030 and carbon neutrality by 2060 requires the active participation of SOEs, particularly in energy-intensive sectors.

SOEs have taken the lead in developing large-scale renewable energy projects, including solar, wind, and hydropower, and are also investing in new technologies such as carbon capture and storage. The China Three Gorges Corporation (CTG), for example, has played a major role in expanding China's hydropower capacity, and the company is now investing heavily in offshore wind farms and solar energy projects.

Table 16: SOE Investments in Renewable Energy (2021–2023)

Year

SOE Renewable Energy Investments (Billion USD)

Share of China's Renewable Energy Capacity (%)

2021

45.2

26.8

2022

52.5

29.4

2023*

58.7 (projected)

33.1 (projected)

Source: Ministry of Energy, 2022

Table 16 demonstrates the increasing role of SOEs in China's renewable energy transition. Between 2021 and 2023, SOEs are projected to increase their investments in renewable energy from USD 45.2 billion to USD 58.7 billion, with their share of the country's renewable energy capacity growing from 26.8% to an estimated 33.1%. These investments are critical for achieving China's carbon neutrality goals and highlight SOEs' leading role in advancing sustainable development (Ministry of Energy, 2022).

SOE Efficiency and Economic Restructuring

Improving the efficiency of SOEs has been a recurring theme in China's Five-Year Plans. The government has introduced a series of reforms to modernize SOEs, making them more competitive and market-driven. These reforms include mergers and acquisitions, restructuring initiatives, and the introduction of mixed-ownership models, allowing private capital to invest in state-owned companies.

The partial privatization of SOEs has been a key strategy in enhancing corporate governance and improving efficiency. The government has also focused on reducing SOE debt levels and increasing their return on assets (ROA), making them more responsive to market conditions. These efforts are reflected in the gradual improvement in SOE financial metrics over the past decade.

Figure 3: SOE Efficiency Metrics (2015-2022)

Year

Return on Assets (ROA %)

Debt-to-Equity Ratio (%)

2015

4.8

64.5

2016

5.2

62.8

2017

5.6

61.0

2018

5.9

60.2

2019

6.1

59.5

2020

6.3

58.3

2021

6.4

57.8

2022

6.5

57.2

?

Source: SASAC, 2023

Figure 3 illustrates the improvement in key efficiency metrics for Chinese SOEs from 2015 to 2022. The Return on Assets (ROA) has increased from 4.8% in 2015 to 6.5% in 2022, while the debt-to-equity ratio has gradually decreased from 64.5% to 57.2%. These figures indicate that SOEs are becoming more efficient and financially sustainable, in line with the government's restructuring goals (State-owned Assets Supervision and Administration Commission of the State Council [SASAC], 2023).

The "Dual Circulation" Strategy: Integration of SOEs into National and Global Markets

Introduced in 2020, the "Dual Circulation" strategy represents a shift in China's economic focus, emphasizing the importance of domestic markets (internal circulation) while maintaining and expanding global engagement (external circulation). Given their dominance in critical industries such as telecommunications, infrastructure, and manufacturing, SOEs are central to both aspects of this strategy.

Internal Circulation: Strengthening Domestic Markets

The "internal circulation" component aims to bolster domestic consumption, increase self-sufficiency in key technologies, and enhance supply chain resilience. SOEs are key players in this effort, providing the infrastructure, investment, and innovation needed to stimulate domestic economic growth.

SOEs such as China Railway Construction Corporation (CRCC) and China State Construction Engineering Corporation (CSCEC) have led major infrastructure projects that improve domestic connectivity and stimulate economic development. These projects support the "internal circulation" strategy, create jobs, and drive domestic demand.

Table 17: Major SOE-Led Infrastructure Projects (2019–2022)

Project

SOE Involved

Sector

Completion Year

Beijing-Xiong'an High-Speed Rail

China Railway Construction Corporation (CRCC)

Transportation

2021

Guangzhou Airport Expansion

China State Construction Engineering Corporation

Civil Aviation

2020

Yangtze River Delta Smart Grid

State Grid Corporation of China

Energy

2022

Source: National Development and Reform Commission (NDRC), 2023

Table 17 outlines key infrastructure projects led by SOEs contributing to China's internal economic development. Projects such as the Beijing-Xiong'an High-Speed Rail and the Yangtze River Delta Smart Grid highlight the critical role of SOEs in improving connectivity and energy infrastructure, which are essential for sustaining domestic economic growth (NDRC, 2023).

External Circulation: Expanding Global Integration

Despite the focus on strengthening the domestic economy, China continues to prioritize its role in global trade and investment through the "external circulation" component of the Dual Circulation strategy. SOEs are deeply embedded in this process, especially through the Belt and Road Initiative (BRI), which aims to expand China's global economic influence.

SOEs have been instrumental in developing infrastructure in BRI countries, building roads and ports, and other critical infrastructure projects that enhance global trade routes and connectivity. These projects help to solidify China's economic partnerships abroad while providing opportunities for Chinese SOEs to expand their international footprint. For instance, China Communications Construction Company (CCCC) and China Energy Engineering Corporation (CEEC) have spearheaded major infrastructure developments in Southeast Asia, Africa, and Europe. These investments benefit China's global economic integration and support its strategic interests by establishing stronger ties with developing nations.

Table 18: SOEs' Key Infrastructure Projects in Belt and Road Initiative (2019–2022)

Project

Country

SOE Involved

Sector

Value (Billion USD)

Mombasa-Nairobi Standard Gauge Railway

Kenya

China Communications Construction Company (CCCC)

Transportation

3.6

Gwadar Port Expansion

Pakistan

China Overseas Port Holding Company (COPHC)

Maritime

4.5

Hungary-Serbia Railway

Hungary/Serbia

China Railway Group

Transportation

2.9

Sihanoukville Special Economic Zone

Cambodia

China Development Bank

Industrial Parks

2.0

Source: National Development and Reform Commission (NDRC), 2023

Table 18 showcases several high-profile infrastructure projects led by Chinese SOEs as part of the Belt and Road Initiative (BRI). These projects, such as the Mombasa-Nairobi Standard Gauge Railway in Kenya and the Gwadar Port Expansion in Pakistan, are critical components of China's strategy to enhance global connectivity and expand its economic influence. The involvement of SOEs in these large-scale projects demonstrates their capacity to mobilize resources and expertise to execute complex international developments (NDRC, 2023).

SOEs and Technological Self-Sufficiency in External Circulation

While infrastructure remains a focal point of the BRI, China's SOEs also play a pivotal role in expanding technological infrastructure in participating countries. Companies like Huawei and China Telecom have laid fiber optic networks and built digital infrastructure as part of the "Digital Silk Road" initiative, which complements the physical infrastructure investments under the BRI. These efforts aim to position China as a global leader in technology and telecommunications, aligning with its broader goal of reducing dependence on foreign technology and securing key digital markets globally.

For example, China Telecom has launched several data centers and communication networks in regions such as Africa and Southeast Asia, facilitating greater connectivity and enabling digital economies to grow. This supports China's technological ambitions and strengthens its diplomatic relationships and influence in developing markets.

Conclusion

The alignment of SOEs with China's national strategic goals, as outlined in the Five-Year Plans and the "Dual Circulation" strategy, highlights their central role in driving the country's economic and technological transformation. Through substantial investments in technological innovation, green development, and domestic infrastructure, SOEs are leading the charge in supporting China's goal of becoming a self-sufficient and globally competitive economy.

The role of SOEs in projects related to the Belt and Road Initiative underscores their significance in expanding China's global economic presence and creating new trade corridors that benefit China and its partners. While challenges remain—such as improving efficiency, managing geopolitical risks, and fostering sustainable growth—the continued modernization of SOEs through policy-driven reforms suggests they will remain key instruments in China's ongoing economic revolution.

2. The Role of SOEs in the Belt and Road Initiative (BRI) and Their Influence on International Trade and Investment

The Belt and Road Initiative (BRI), launched by China in 2013, is one of the most ambitious global development strategies ever undertaken. Aimed at enhancing global connectivity and trade, the BRI involves massive infrastructure investments across Asia, Africa, and Europe. China's State-Owned Enterprises (SOEs) are central to implementing this initiative and are pivotal in realizing China's geopolitical and economic objectives through the BRI. This section examines the critical role of SOEs in the BRI, focusing on their influence on international trade, infrastructure development, and investment in key sectors like energy and telecommunications. Additionally, it assesses the broader implications of their involvement in China's global integration and economic influence.

SOEs as Key Drivers of Infrastructure Development in the BRI

China's SOEs have been at the forefront of the physical infrastructure development that underpins the BRI. These enterprises have led the construction of highways, railways, ports, and energy infrastructure that link China with countries across Asia, Africa, and Europe. SOEs such as China Communications Construction Company (CCCC), China Railway Construction Corporation (CRCC), and China National Petroleum Corporation (CNPC) have undertaken large-scale projects that are critical to fostering economic cooperation and reducing trade costs along the BRI routes.

One notable example is the construction of the Mombasa-Nairobi Standard Gauge Railway in Kenya, which CCCC completed. This $3.6 billion project significantly reduced transportation time and costs between the port city of Mombasa and Nairobi, enhancing trade flows within East Africa. Such projects demonstrate how Chinese SOEs are building infrastructure and driving economic integration and development in BRI partner countries.

Table 19: Major Infrastructure Projects by Chinese SOEs under BRI (2015–2022)

Project

Country

SOE Involved

Sector

Value (Billion USD)

Mombasa-Nairobi Standard Gauge Railway

Kenya

China Communications Construction Company (CCCC)

Transportation

3.6

Gwadar Port Development

Pakistan

China Overseas Port Holding Company (COPHC)

Maritime

4.5

Hungary-Serbia Railway

Hungary/Serbia

China Railway Construction Corporation

Transportation

2.9

Karot Hydropower Project

Pakistan

China Three Gorges Corporation

Energy

1.4

Source: National Development and Reform Commission (NDRC), 2023

Table 19 highlights the significant role of Chinese SOEs in large-scale infrastructure projects under the BRI. These projects, spread across key regions such as Africa, Central Asia, and Europe, reflect China's strategy of using SOEs to enhance international trade corridors, facilitate energy supply, and improve transportation links. For example, the Gwadar Port in Pakistan is critical for maritime trade. China's broader ambition is to establish alternative trade routes that bypass the more congested and geopolitically volatile Straits of Malacca (NDRC, 2023).

SOEs in Energy and Resource Investments within BRI

Energy security is a critical component of the Belt and Road Initiative. Chinese SOEs have been crucial in ensuring a steady energy supply to meet China's growing demands. By investing in foreign energy assets, particularly in oil and gas pipelines, refineries, and renewable energy projects, SOEs such as China National Offshore Oil Corporation (CNOOC), China National Petroleum Corporation (CNPC), and China Energy Engineering Corporation (CEEC) have secured vital energy resources while simultaneously enhancing China's influence in energy-producing regions.

The Central Asia-China Gas Pipeline, built by CNPC, is a prime example of the importance of energy infrastructure in the BRI. Spanning over 10,000 kilometers, this pipeline allows China to import over 55 billion cubic meters of natural gas annually from Turkmenistan, Kazakhstan, and Uzbekistan, reducing China's reliance on maritime routes and promoting energy security.

Table 20: Key Energy Projects by SOEs under BRI (2015–2022)

Project

Country

SOE Involved

Energy Source

Capacity

Value (Billion USD)

Central Asia-China Gas Pipeline

Kazakhstan/Turkmenistan

China National Petroleum Corporation (CNPC)

Natural Gas

55 BCM annually

7.5

Gwadar Coal Power Plant

Pakistan

China Energy Engineering Corporation (CEEC)

Coal

1,320 MW

2.0

Karot Hydropower Project

Pakistan

China Three Gorges Corporation

Hydropower

720 MW

1.4

Source: Ministry of Commerce, 2022

Table 20 illustrates the central role of SOEs in developing critical energy infrastructure under the BRI. These projects not only enhance China's access to vital energy resources but also contribute to the economic development of partner countries by providing reliable energy supplies. For instance, the Central Asia-China Gas Pipeline plays a key role in ensuring stable energy flows to China while fostering economic ties with Central Asian countries (Ministry of Commerce, 2022).

Influence of SOEs on International Trade and Investment

By improving transportation networks, energy infrastructure, and trade facilitation projects, Chinese SOEs have significantly expanded China's influence in international trade. The construction of new trade corridors, such as railways and ports, has reduced transportation costs and improved logistics for China and its BRI partners. Additionally, these infrastructure developments have opened up new markets for Chinese goods and services while creating opportunities for Chinese firms to participate in foreign direct investment (FDI) in strategic sectors.

For example, the China-Europe Railway Express, managed by China Railway Group, has significantly enhanced trade between China and Europe. The railway connects major Chinese cities with European markets, reducing shipping times from 40 days by sea to 14 days by rail. This improvement in logistics has led to a significant increase in the volume of goods traded between China and Europe.

Table 21: China-Europe Railway Trade Volume (2015–2022)

Year

Containers Shipped

Trade Volume (Billion USD)

2015

3,000

10.2

2017

8,000

25.4

2019

15,000

45.6

2021

30,000

65.8

2022*

50,000 (estimated)

70.1 (estimated)

Source: National Development and Reform Commission (NDRC), 2023

Table 21 highlights the rapid increase in trade volume facilitated by the China-Europe Railway Express. The number of containers shipped rose from 3,000 in 2015 to an estimated 50,000 by 2022, illustrating the railway's growing importance as a critical trade corridor. The corresponding rise in trade volume, from USD 10.2 billion to an estimated USD 70.1 billion, underscores the significant impact that infrastructure projects led by Chinese SOEs have had on enhancing trade between China and Europe (NDRC, 2023).

Challenges and Geopolitical Implications

While the involvement of Chinese SOEs in the BRI has undoubtedly boosted international trade and investment, it has also raised concerns over debt sustainability, environmental impact, and geopolitical influence. Some critics argue that China's investments, particularly through SOE-led projects, create "debt traps" for developing countries, as seen in Sri Lanka's controversial decision to lease Hambantota Port to a Chinese SOE after struggling to repay loans.

Additionally, environmental concerns have been raised about the sustainability of some SOE projects, particularly those involving coal power plants and large-scale infrastructure developments that can disrupt ecosystems and displace local communities. China's SOEs are increasingly pressured to adopt more environmentally sustainable practices in line with international standards, especially as China seeks to position itself as a leader in green development.

Figure 4: Environmental and Social Concerns About BRI Projects (2015-2022).

Year

Number of Reported Environmental Concerns

Number of Reported Social Concerns

2015

10

15

2016

18

20

2017

25

28

2018

30

35

2019

40

45

2020

55

60

2021

70

80

2022

85

95

Source: Ministry of Environment, 2022

Figure 4 depicts rising environmental and social concerns related to BRI projects, particularly from 2015 to 2022. These concerns, which range from ecosystem disruption to community displacement, have prompted calls for stricter environmental regulations and more sustainable practices by Chinese SOEs operating abroad. The upward trend in such concerns underscores the need for China to align its global development efforts with more sustainable and socially responsible practices (Ministry of Environment, 2022).

Conclusion

Chinese SOEs have been indispensable in advancing the Belt and Road Initiative, driving international trade, investment, and infrastructure development across various sectors. These enterprises have significantly expanded China's global influence while promoting economic integration with partner countries through their involvement in major transportation, energy, and digital infrastructure projects. However, the growing concerns surrounding environmental sustainability and the geopolitical implications of China's investments pose challenges to the long-term success of SOE-led initiatives.

Chinese SOEs must adopt more sustainable and transparent practices as the BRI evolves to address these challenges.

Summary

This chapter provides an in-depth analysis of China’s SOEs in the energy, telecommunications, and technology sectors. In the energy sector, major reforms have opened up competition and attracted private investment, especially in renewable energy. Companies like CNPC and Sinopec have expanded their global footprint by securing resources through international partnerships and investments in regions like Kazakhstan, Iraq, and Brazil. In telecommunications, SOEs such as China Mobile and China Telecom dominate, especially in 5G and AI technology, which has enhanced China’s global digital infrastructure and influence. The chapter also explores how these enterprises align with China’s national strategic goals, such as the Belt and Road Initiative, and their role in advancing China’s economic growth and technological independence. Despite the progress, the chapter also acknowledges challenges like regulatory barriers, environmental concerns, and geopolitical tensions that could affect SOE-led expansion in international markets.

References