Private capital now plays a greater role in state assets disposal than ever before, but the lack of legal support undermines its participation in state-owned enterprise (SOE) restructuring, experts said.

"The restructuring of state assets will face more problems if private enterprises haven't been fully developed", said Zhang Wenkui, a vice director of the State Council Development Research Center.

He noted that many private enterprises had the ability to participate in the disposal of state assets no matter if in capital, technology or management. Currently, about 8 percent of private enterprises have been greatly developed through M&As.

However, many obstacles have been found when private enterprises join state asset disposal. Lü Zheng, director of the Institute of Industrial Economy under the Chinese Academy of Social Sciences, attributes the main problems to the lack of sound laws and policies.

Although there are some policies on private participation in the disposal of state assets, these policies, scattered in different circulars and files, may contradict one another.

Lü also warned that the process should be kept transparent where private capital flows into the disposal of state assets.

On the other hand, Professor Li Shuguang from China University of Politics Science and Law worried about local governments' intervention in state asset disposal. "The participating private enterprise can't cast off the influence of local government if there is no legal support," he said.

To secure the interests of shareholders or local governments, private enterprises have to keep the balance between each side. If there is no law safeguarding their interests, it is vital for private enterprises to keep a good relationship with local government.

(China.org.cn by Tang Fuchun October 21, 2003)