As part of its ongoing drive to rationalize and restructure its
hundreds of state-owned enterprises (SOEs), China will close some
firms and impose capital operation budgets on the survivors, said a
high-level official.
"The goal of the reforms is to reorient state capital away from
poorly-performing companies in non-critical areas to priority
sectors," said Shao Ning, Vice-Minister of the State-owned Assets
Supervision and Administration Commission (SASAC) at a recent
forum.
The SASAC will compile capital operation budgets for the 161
central SOEs directly under its supervision. The budgets of other
SOEs will be compiled by the Ministry of Finance. This move will
ensure that the utilization of state funds meets government
criteria.
According to the SASAC, the central SOEs will lose the privilege
of retaining their profits, which totaled US$75 billion last
year.
They will be required to hand over some of their after-tax gains
to the government. But Shao did not specify the proportion.
According to previous reports, SOEs supervised by state-assets
administrations in Beijing, Shanghai and Shenzhen have already
begun handing over 20 percent of their net profits to local
administrations.
The state-assets administration may sell its entire shareholding
in state companies engaged in non-critical sectors.
As of next year, the income of the state-assets administration
will come from dividends and from the sale of shares, according to
SASAC.
The overall goal of the administration is to allocate capital to
companies in critical sectors where there is potential for
development and help them expand.
The administration will grant funds to struggling state
companies who cannot afford the cost of bankruptcy to help absorb
the cost of lay-offs.
China has launched a four-year program to close 2,000 SOEs
before 2008, with social security and reemployment major challenges
to overcome in the bankruptcy process.
A SASAC official said last week that China had approved the
bankruptcy of 619 companies and planned to let a further 500
struggling SOEs go to the wall by the end of this year.
(Xinhua News Agency December 13, 2006)