Over 2,500 Chinese SOEs yet to be closed: official

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Last updated at: (Beijing Time) Wednesday, November 19, 2003

Over 2,500 Chinese SOEs yet to be closed: official

A senior Chinese official said Wednesday China now has some 2,500 large and medium-sized state-owned enterprises (SOEs) that are in fact bankrupt but yet to be closed down.

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A senior official said Wednesday China now has some 2,500 large and medium-sized state-owned enterprises (SOEs) that are in fact bankrupt but yet to be closed down.

Li Rongrong, minister in charge of the State-owned Assets Supervision and Administration Commission, made the remarks at the International Merger and Acquisition Summit Beijing 2003.

These SOEs employ 5.1 million workers and involve a total of 240 billion yuan (29.0 billion US dollars) of liabilities.

Li said the SOEs cannot immediately exit the market due to certain restrictions, including banks' inability to write off the non-performing loans, limited fiscal resources of the government and inadequacy of the social security system.

From 1994 to 2002, Li said, 3,080 SOEs were closed down or went bankrupt in China, with 199.54 billion yuan (24.1 billion US dollars) of non-performing loans written off and 5.3 million laid-off workers relocated.

China will create a better environment for large foreign companies to participate in the merger, acquisition and restructuring of its SOEs, said the minister. At international forum on merger and acquisition, foreign investors will see a broader field and more relaxed policies when engaged in the merger and acquisition business in China.

According to Li, foreign companies and non state-owned enterprises have been involved in 83 percent of the property righttransfer of SOEs directly under the central government since the establishment of the commission in March this year.

Foreign investors currently are concerned with sound enterprises in China, including listed companies, and most of them are targeted at leading enterprises in their industries, Li added.

China will further formulate and improve related laws and regulations to provide perfect legal guarantee for foreign investors' merger and acquisition of Chinese SOEs, Li said.

China will speed up shifting state-owned enterprises (SOEs) to joint stock companies next year so they can be listed at home and abroad, according to Shao Ning, Vice Minister of the SASAC.

He was rported as saying that the SASAC's major task next year is to push forward restructuring of SOE corporate governance and urge promising SOEs to list on domestic and overseas stock markets.

Another SASAC official, Ma Jiantang, said early this month in Suzhou city, Jiangsu Province that China welcomes overseas investors to takeover its SOEs.

The State Council announced on Nov. 13 a list of 189 SOEs that have the SASAC as the investor representing the state.

All the SASAC does is to act as a responsible investor of SOEs in line with laws, Shao said.

An overall checkup upon total assets of SOEs has been carried out to pave the way for supervision, he said.

Next year managers of the 189 SOEs will receive a pay package based on performance, Shao said.

Six large Chinese state-owned enterprises (SOEs) recruited senior executives from home and abroad since mid September, the first such move to improve their personnel structure.

In conjunction with higher standards to test the performance of State-owned enterprise executives, the Chinese authorities will offer them better pay and benefits.

Like in many local State enterprises, managers at central SOEs will get salaries that better reflect the market conditions starting from next year, according to Shao.

The commission is also studying stock options, pension benefits and other long-term incentives for top executives, he said at the forum.

Shao said the SOEs would also reform the personnel system and hire more senior executives through open recruitment.

SASAC, the central State assets supervisory body, is now directly supervising 189 of the biggest and central SOEs as the representative of the State in these enterprises, leaving the rest to the mandate of local State-asset watchdogs.

There has been a tide of restructuring in the economy over the past few years through mergers and acquisitions of once State-monopolized sectors. Even the biggest SOEs have been feeling the pressure to reform and boost efficiency.

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