Following are excerpts of this article written by Liu Hong, director of State Statistics Bureau.

In 1997, the Party Central Committee set the objective of lifting most large and medium-sized losing State-owned enterprises (SOEs) out of difficulties in about three years. This is an important task for advancing the reform and development of State-owned enterprises. The recent Central Economic Working Conference designated the realization of this goal as the most important aspect of next year's economic work. Reinforcing confidence to achieve this objective is of important significance to the development of SOEs and even the entire national economy.

To effectively boost the work of lifting large and medium-sized loss-making State-owned enterprises, it is first necessary to have a comprehensive comprehension and correct understanding of the standard for losing enterprises to get out of difficulties. There are two kinds of descriptions on the standard as made at the Party's 15th National Congress and the First and Fourth Plenary Sessions of the 15th Central Committee of the Communist Party of China (CPC): First, helping most large and medium-sized losing SOEs to get out of difficulties in about three years; second, bringing about marked improvements in enterprises' operation. In line with this requirement, we should comprehend and judge, from two levels, the standard for lifting large and medium-sized loss-making SOEs out of predicament.

Viewed from the enterprise level, we should judge the situation regarding freedom of enterprises from difficulties by combining reversion and reduction of losses, and should not simply regard reversion and elimination of losing enterprises as the standard for getting out of difficulties. At present, the situations of loss-making enterprises differ vastly. Among enterprises suffering a slight loss, some suffer an annual loss of tens of thousands of yuan; while among seriously losing enterprises, some suffer the heaviest loss of over 1 billion yuan a year. If ridding SOEs of difficulties is understood in an oversimplified way as reversing losses and reducing the area covering losing enterprises, that will often make it impossible to accurately reflect the reality of the work of lifting losing SOEs out of difficulties. Therefore, we should judge the standard by combining reversing and reducing losses. After a period of three years, most large and medium-sized State-owned losing industrial enterprises reverse losses or enormously reduce losses, and the situation of their operation has witnessed marked improvement, this indicates that the goal of eliminating difficulties in three years has been achieved.

Viewed from the macro level, on the basis of getting most large and medium-sized losing State-owned industrial enterprises out of difficulties, the work of reversing and reducing losses in trades and regions should generally obtain notable results, so that large and medium-sized SOEs in most trades can generally turn deficit into profit, and the large and medium-sized SOEs in most regions can also do the same.

In light of the current development trend of reversing deficit and increasing profit in enterprises and the conditions in various fields, the goal of getting most large and medium-sized losing State-owned industrial enterprises out of predicament in three years, that is, reversing or substantially reducing losses can be achieved. According to our analysis, through the common efforts of various quarters, by the end of 2000, the area covering large and medium-sized losing State-owned industrial enterprises can at least drop from 39.1 percent in 1997 to below 30 percent; the total value of deficit incurred by loss-making enterprises can possibly decrease by around 40 percent compared to 1997.At the same time, except for a few trades such as coal and military industry, the large and medium-sized State-owned industries in most trades can generally ensure a switch from deficit to profit; with the exception of a few regions plagued by special difficulties, large and medium-sized State-owned industries in most provinces, autonomous regions and municipalities directly under the central government can generally ensure a turn from deficit to profit.

Since the beginning of this year, under the correct leadership of the Party Central Committee and the State Council, various regions, departments and enterprises have conscientiously implemented the Party Central Committee's plan for the work of getting rid of difficulties and have done a great deal of work. 1. In compliance with the requirement of establishing a modern enterprise system, they have quickened the pace of system innovation. 2. They have pushed forward the readjustment and regrouping of industries as a whole, and intensified efforts for enterprise bankruptcy, amalgamation and reorganization. 3. They have accelerated structural readjustment and different degrees of progress have been made in controlling aggregate and eliminating backward production capacity in textile, building materials, petrochemical, power, metallurgical, tobacco and other industries. 4. They have increased efforts in verifying and writing off bad debts and have done something in favor of key industries and key enterprises; they have solved the outstanding problems plaguing a group of enterprises and eliminated a batch of sources of loss. 5. They have begun to implement the transformation of debts into equity; a group of enterprises which have market for their products but are sustaining heavy debt burdens are hopeful of lightening their burdens. 6. They have cracked down on smuggling activities and stabilized domestic markets and have thus created conditions for a group of enterprises, which have been seriously impacted by smuggling activities, to turn from deficit to profit or substantially reduce losses. What is more, the measures, such as the active financial policy, successive lowering of interest rates, raising export refund, and liquidating irrational collection of charges adopted by the central government, have brought about a pick-up in social demands, maintained a steady growth of the national economy and improved the external environment for enterprises.

The efforts mentioned above have effectively curbed the tendency of a drastic fall in enterprise efficiency caused by the impact of the Asian financial crisis and the restraint brought by insufficiency in domestic demand, there has been a marked improvement in enterprise benefits. First, a group of large and medium-sized losing State-owned industrial enterprises (including State-owned holding enterprises, same below) have put an end to deficit and shaken themselves off predicament, some enterprises have realized the reorganization of assets through amalgamation. Second, loss-making industries have achieved fairly good results in the work of reversing and reducing losses. Third, The number of regions suffering net losses has been greatly reduced. In the three northeast provinces (Liaoning, Jilin and Heilongjiang), as the key and difficult points in the task of getting themselves out of difficulties in three years, the operation of large and medium-sized State-owned industrial enterprises has been notably better than last year. This series of changes indicate a new turn in the operation of many loss-making enterprises.

It should be noted that the sharp drop in enterprise benefits last year has added great difficulties to the work of ridding enterprises of difficulties. The obvious pick-up in enterprise benefits in the first 10 months of this year carries a certain degree of restorative nature. Moreover, fundamental changes have taken place in the current pattern of social supply and demand, a buyer's market has taken initial shape, the binding force of the market has become increasingly strong, this has brought tremendous pressure on the effort to improve the situation regarding enterprise operation. To realize the objective of getting enterprises out of predicament in three years, we must give prominence to key points, intensify efforts to ensure success in next year's battle of tackling major and difficult problems regarding freeing enterprises out of difficulties.

In the country as a whole, the number of enterprises suffering serious or fairly serious losses accounts for around 60 percent of all loss-making enterprises, whether or not these portion of enterprises can reverse losses or substantially reduce losses has a great bearing on the realization of the goal of freeing enterprises of predicament in three years. Such being the case, the State should, while helping enterprises suffering slight losses to end deficit and increase profit, put its emphasis on enterprises suffering serious or relatively serious losses, give them stronger policy support, thereby urging them to substantially reduce losses.

At present, among the large and medium-sized State-owned industrial enterprises, the proportion of slightly profitable enterprises with an annual profit amount of below 1 million yuan represents more than 40 percent of the total number of profitable enterprises. As far as the majority of slightly profitable enterprises are concerned, their profit-making foundation is not firm, if fluctuation happens to the market, some of these enterprises may face a turn from profit to deficit. Under this circumstance, in the work of getting enterprises out of difficulties, we should have a wider field of vision. Not only should we mainly tackle the task of lifting loss-making enterprises out of difficulties, but we should also ensure that slightly profitable enterprises can maintain and increase profits. Doing so will help guarantee achievement of the objective of shaking loss-making enterprises off difficulties in three years.