China's arms industry reform bears fruits

China's largest arms manufacturer became a stock-holding company after the SOE structural reform.

China North Industries Group Corporation, also known as Norinco Group, started mixed ownership pilot reforms at its tank factory in Baotou, north China's Inner Mongolia Autonomous Region. It was once a state-owned business.

"We've introduced private capital and reallocated resources, so it's no longer a state-owned company. It is now transparent financially, but of course, the defense technology remains confidential. Now it's responsible to shareholders and investors," said Yin Jiaxu, Chairman of Norinco.

Norinco builds private affiliates for the civilian applications of defense technologies, and hands out shares to the tech developers and management teams. The group now has 12 listed companies in sectors including automobile parts, chemicals, and electronics.

"Our reform involves encouraging research teams to turn their work into marketable products. We can use one-off payments or shares as rewards. Some applications keep developing, so it's better to pay the technical team with dividends from the profits," Yin said.

To make sure the mindset is entirely market-oriented, Norinco also sets the rule that its second and third tier subsidiaries that make civilian products must have management or private investors.

Norinco's overall revenue of core business rose from 236 billion yuan in 2010 to 383 billion yuan in 2015. The group ranked the 134th in last year's Fortune 500.

This year, its revenue grew by 13 percent for the first eight months, while the profits are up 20 percent.

Its overseas business generated 175.4 billion yuan of revenue, taking up about 43 percent of the total, and over 40 countries have signed deals or done business with it so far.