The Chinese government has selected China Eastern Airlines (MU, Shanghai Hongqiao) to be part of a pilot scheme to reform state-owned enterprises (SOEs) to mixed Public/Private ownership models.

The scheme, which is being rolled out in a slow and controlled manner, is intended to reinvigorate China's bloated public sector by creating globally competitive multinational corporations capable of turning a profit by 2020.

"Mixed ownership could help prioritize the companies' management and encourage property rights diversification while encouraging more private capital to invest in SOEs," Li Jin, head of the China Equipment Management Institute, told China Daily.

As part of the first pilot reform scheme, the National Development and Reform Commission (NDRC) and the State-owned Assets Supervision and Administration Commission (SASAC) have included a broad spectrum of SOEs. Aside from China Eastern, they include China Southern Power Grid, Harbin Electric Corporation, the China Nuclear Engineering & Construction Corporation, and China Shipbuilding Industry Corporation. More precise details will be released shortly the official Xinhua news agency said last week.

China has three airlines that operate as SOEs: China Eastern, China Southern Airlines, and Air China.

The reform process has been in motion for a few years, with China Eastern selling a 3.55% stake to Delta Air Lines back in 2015 for USD450 million. China Southern is also in the process of securing regulatory approval for the sale of a 2.76% stake to American Airlines.