Government-linked firms gain strong support in Asian economies

State backing makes GREs central to Asia’s stability.

State support for government-related entities (GREs) in Asia is “virtually certain,” according to Fitch Ratings analysis, underscoring the central role these firms play in economic growth, infrastructure development, and social stability across the region.

Ying Wang, Managing Director, APAC Corporates, Fitch Ratings, said GREs are tightly integrated into the way Asian economies function. “We think that GRE in Asian economies play important roles to help the governments execute their policy objectives, drive economic growth and maintain social stability,” she said.

Wang explained that many Asian governments have long histories of steering wealth into strategic industries, embedding GREs into the economic and social fabric. “GREs often operate in sectors which are very critical to national development, such as infrastructure, energy, utility, transportation and finance. The governments use GREs to implement large scale projects, stimulating investment and accelerate industrialisation,” she added.

Samuel Kwok, Head of APAC International Public Finance, Fitch Ratings, said GREs often emerge to cover areas where private firms fall short. “Many Asian governments do set up GREs mainly to fill gaps that are not covered by the private sector,” he noted.

Still, both analysts cautioned that assuming uniformly high support across all GREs carries risk.

“There are inherent risks in assuming uniformly high government support for GRE because not all GREs have equal importance to the government's objectives,” Wang said. “GRE with less critical roles in less strategic sectors may receive lower levels of support, and there could be changes in government priorities, leadership or policy directions, which can affect support levels as well.”

For private investors, balancing stability with government influence is key. “While government involvement can provide stability, it can also, at the same time, create uncertainty, especially if policy direction shifts, or when it comes to striking a balance between policy and profitability,” Kwok said.

Wang added that transparency and governance practices often reassure investors. “Transparency, the strength of the regulatory framework and also clarity of government policy direction, help to provide comfort to private investors regarding the adequacy and predictability of government support for GRE,” she said.