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 | Friday, April 21, 2000, updated at 09:56(GMT+8) | ||||||||||||
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China's Enterprise Reform ProcessingChina's enterprise reform is steadily processing although most enterprises are still facing poor financial situation and low economic efficiency, according to the Organization for Economic Cooperation and Development (OECD).With the assistance of the State Council and the National Bureau of Statistics, the OECD has made a series of investigations and researches in recent months on China's enterprise reform. A comprehensive report about raising Chinese enterprises' efficiency is expected to be published within the OECD's member countries soon. At a seminar on the research, senior officials with the OECD revealed some main points of views of the report. Since 1980, most state-owned and collectively-owned enterprises are losing money or making little profit. Compared to most other member countries, China's enterprises have higher rate of debts. Chinese enterprises have been forced to hire excessive workers and they are also charged with many social security expenses, which are usually shared by government and workers in other countries. The excessively high taxation towards state-owned enterprises (SOEs) is another important reason of their low profit. Enterprise's overcapacity and overstocking of products caused by early 1990s' immoderate investment have seriously reduced their product price and further production. Besides these administration burdens, the outdated production equipment, backward technology and poor management have all ended with low quality of the products. Low business efficiency exists in Chinese enterprises, but this problem has been overestimated. In fact, many state-owned enterprises have high efficiency and competitive power. The report shows that China has got great success in activating its enterprises in the past few years. By the end of 1999, half of the excessive workers in China's SOEs had been removed. At the same time, a large number of out-dated production equipment had been eliminated in textile, coal and steel enterprises. Experts believe that if these policies continue, the excessive labor force and production capacity will be greatly reduced in the next two to three years. The successful Debt-Equity Swap activities of the four financial asset management companies also made great progress in reducing the debt burdens of big SOEs. The report said that the profit rate of Chinese enterprises will increase dramatically in the near future, due to the reduction of debts. Some economist said that this can be a main reason for the profit bounce back of Chinese enterprises in 1999, except of other reasons, such as anti-smuggling and export increase. However, the lack of government financial resources and too much limits on enterprise merger and purchase have seriously restricted the economic restructuring. Collectively-owned and private enterprises, which have made great contribution to Chinese economic growth in the 1990s, have not got enough attention from the government. The OECD suggests that SOEs should be limited within a reasonable range. Economists worry that immoderate expansion of SOEs will become a long-term burden of public finance.
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