Chongqing municipality has drafted policies to encourage foreign capital in the reform of state-owned enterprises (SOEs) in the coming two years, according to the municipal government.

Having a large number of SOEs, Chongqing, one of the largest cities in southwest China, will make use of some domestic and mostly overseas financing to restructure or annex some 25 unprofitable Chinese enterprises.

In addition, 52 SOEs in severe financial difficulty will declare bankruptcy, a government spokesman said on November 11.

Domestic and overseas corporations which take part in the SOE reform will enjoy preferential policies such as suspension of the repayment of debt and interest to the government. These companies also will be freed from the burden of sponsoring schools, hospitals and other social welfare organizations as SOEs were asked to in the past.

The local government will also give its maximum support to these overseas companies, and detailed policies on encouraging competent enterprises to restructure troubled SOEs will soon take effect, according to the spokesman.

Chongqing is the largest old industrial base in western China, but quite a number of its enterprises are experiencing management dilemmas. The losses incurred by its large and medium-sized enterprises were 20 percent higher than the nation's average in 1998. (Xinhua)