SOEs to Have New Rules: State Assets Supervisory Body

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Last updated at: (Beijing Time) Friday, July 11, 2003

SOEs to Have New Rules: State Assets Supervisory Body

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Faster compilation of new rules and the stricter examination of the performance of the State-owned enterprises (SOEs) and their managers are two major issues that are on the top of the agenda of China's newly-established State assets supervisory body.

To ensure efficiency and avoid disputes, the State-owned Assets Supervision and Administration Commission (SASAC) is gathering its pace in drafting rules over a wide range of issues involved in the State assets management and supervisory scheme.

Rules, which are already being planned, concern the authorization of State assets management in enterprises, ways to handle major events in the key subsidiaries of the SOEs, transfer of property rights owned by the State and measures to handle relative property rights disputes, said SASAC Director Li Rongrong at a work conference yesterday in Beijing.

Also in the pipeline are a regulation on the performance evaluation of the State assets operation and one on the transfer of State-owned shares in listed companies.

Li did not give a timetable of the rules, but said the work is urgent.

The three-month-old SASAC, the sole representative of the State as an owner and investor in the 196 central and biggest SOEs, leads a dramatic reform of the State-assets management system in China, with subordinate local supervisory agencies across the country.

Only playing the role as an investor in the SOEs means it should not shoulder the public management functions of the government, but focus on the maintenance and appreciation of the value of the State-owned assets, said Li.

The SASAC is trying to build a new and comprehensive evaluation system of SOE managers, whose position, payment and relative awards and penalties will be closely connected to their actual performance.

Li said the system will be practiced next year in all the 196 central SOEs, with clear objectives set for the managers in the working contracts. Enterprise leaders that cannot meet the goals will receive lower payments or be removed.

But stock options and other incentives will also be applied to encourage good performers.

Li Yizhong, deputy director of SASAC, said the commission is also planning to adopt a new budget system for both the SOEs and the State assets supervisory agencies, in which a capital budget will be made to supplement the ordinary fiscal budget.

The new budget is expected to set goals for the profit and returns of the State capital in the SOEs. Lower costs and stronger core competitiveness will make the SOEs more efficient and profitable.

China aims to build up 30 to 50 internationally competitive State-owned or State-controlled enterprise groups in the future and more SOEs will be listed abroad, said Li Rongrong.

Those SOEs that are no longer competitive will either close or go bankrupt within the next three to five years.

But the reshuffle does not mean the withdrawal of all State forces in the competitive sectors.

He has said earlier that the 196 central SOEs will not be privatized. The focus is to promote their internal reform and adopt a modern management system.

So far, about 80 per cent of these central SOEs have adopted the corporate restructure. And among all the domestically listed firms, SOEs account for more than 70 per cent.

By the end of 2002, China's State-owned assets totalled 11.8 trillion yuan (US$1.4 trillion), SASAC sources said. The number of State-owned or State-controlled enterprises was 159,000 at that time, down more than 8 per cent from a year ago.

Though the number of SOEs is gradually declining, the strength of the SOEs will increase, Li Rongrong said.

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