China launched a $52.5 billion fund for boosting its 'supply-side' reforms. The fund is intended to restructure and redesign its state-owned enterprises.

While the Chinese economy is still growing fast despite some roadblocks, its state-owned enterprises are riddled with excess capacity.

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The fund has been established for increasing the competitiveness of state-owned enterprises. It will also be used for their international expansion and operations. The fund, which will be managed by the State-owned Assets Supervision and Administration Commission (SASAC), has an initial registered capital of 131 billion yuan given by 10 State-owned enterprises (SOEs).

Reuters reported that Zhou Hao, senior emerging markets economist at Commerzbank, shared that the main function of the fund is to enable the process of deleveraging and destocking.

It is worth noting that China employed 37 million people in its state sector in 2013, contributing 40 percent of the country's total industrial output.

Meanwhile, between 1998 and 2003, China carried out mass retrenchments and paid 73.1 billion yuan in resettlement funds.

The main firms contributing to the fund are China Mobile Ltd, China Petroleum & Chemical Corp and China Railway Rolling Stock Corp. 

The country's state sector also struggles with over-leverage as the burden of debt grows to undermine its efficiency. The government seeks to make these enterprises competitive and innovative through various tools such as management reforms and mergers.

Earlier this year, China had announced that it endeavors to bring down the number of SOEs from 106 to no more than 100.

The SOEs are likely to complete their restructuring by the end of next year. 

Tagschina, China Mobile Ltd, China Petroleum & Chemical Corp, China Railway Rolling Stock Corp, China State Enterprises