China's Money-losing SOEs Face Bankruptcy

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Last updated at: (Beijing Time) Monday, September 01, 2003

China's Money-losing SOEs Face Bankruptcy

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More than 2,000 State-owned enterprises (SOEs) on the brink of insolvency are expected to go bankrupt within five years, said sources from State-owned Assets Supervision and Administration Commission (SASAC).

This is an important step in the country's State-owned assets restructuring process, the anonymous official told China Daily on the occasion of the Mayors' Summit Forum held over the weekend in Beijing.

Many of these companies are SOEs in "sunset industries," and have suffered long-term losses due to poor management and outdated skills and technologies, he said, adding that both foreign and private sector companies will be allowed to participate in the bidding for takeover of such bankrupt companies.

The official also expressed his concern that the policy of allowing these loss-makers to go bankrupt will make China's employment situation much tougher.

The Ministry of Labour and Social Security said recently that China needs an additional 24 million jobs for its unemployed urban residents. The figure includes about 10 million young urban residents who were added to the urban labour market earlier this year, 6 million workers laid off from SOEs, and nearly 8 million jobless residents registered with government labour agencies.

But China's growing economy will add only about 10 million jobs this year, if the national economy grows at about 7 per cent for the year. This will mean an oversupply of labour of some 14 million people in urban China.

"Further bankruptcies will make things extremely tough for redundant workers, and will likely exacerbate China's urban unemployment problems," said the official.

But the ministry seems confident that the situation for re-employment of laid-off workers is promising. The ministry recently announced that about 18.3 million workers laid off by SOEs in the past five years have found jobs, with most of them employed in the service sector and private companies.

"Their re-employment made it possible for China's State-owned sector to undergo strategic restructuring over the past five years as the country shifted from a planned to a market economy," said the ministry.

The number of people presently employed in the country's SOEs is 50 million, as against 71 million five years ago.

At the forum, organized by the China Association of Mayors, experts and officials said the bankruptcy policy is an essential measure in restructuring and reviving China's SOEs.

From 1995 to 2002, a total of 7,798 SOEs went bankrupt. But SASAC said that at the end of 2002, there were still 159,000 State-owned or State-controlled industrial and commercial enterprises.

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