Chinese military enterprises are expected to raise over 50 billion yuan (US$6.8 billion) from the capital market by 2010, an official from the State Commission of Science, Technology and Industry for National Defense said.

"It will take five years for most Chinese military companies to complete the shareholding reform," Wu Fenglai, head of the commission's reform department, told China Securities Journal yesterday.

To boost profitability, most military firms could be financed through the capital market, Wu said. Besides, assets that could be listed will not be restricted to those only for civilian use, but a combination of military and civilian assets.

Some big military corporations have already spun off their civilian product businesses for stock market listings.

Jiangnan Heavy Industry Co, part of China State Shipbuilding Corp, which builds both naval and civilian vessels, has raised 7 billion yuan through an IPO.

Foreign investors are also being allowed to take a stake in China's military enterprises.

"Except State-owned military enterprises, foreign investors will not be excluded from taking a stake in military firms," said Wu, adding foreign investment would even be allowed in State-controlled defense enterprises if the foreign strategic investor can enhance the innovative, managerial and competitive ability of an enterprise.

The government will also encourage domestically listed State-controlled companies to acquire and reform defense firms, said Wu.

(China Daily December 26, 2007)