Li Rongrong, director of the State-owned Assets Supervision and Administration Commission (SASAC), said the regulation on management buyouts (MBOs) of state-owned enterprises (SOEs) is currently being consulted on and will be published soon.
Speaking on a CCTV program on February 2, he reiterated his opposition to MBOs, saying that it was currently inappropriate to adopt them as a general approach. "Many state assets are priced and bought by the same executives," he pointed out.
The issue has been under the spotlight since Larry Lang, a professor at the Chinese University of Hong Kong, published reports saying that many executives of large SOEs encroached on state assets and that MBOs were bad for China's reforms.
The SASAC later ordered for all MBOs to stop whilst they were debated.
Senior executives of SOEs directly supervised by the SASAC attended a meeting on December 14, which agreed that MBOs should be regulated.
Small and medium-sized SOEs would be able to progress with MBOs, on condition that they guarantee capital providers, equity and responsibility, whilst large SOEs would not be allowed to go ahead with them.
According to Li, the draft regulation will encourage and standardize the state equity trade. The SASAC has appointed three equity exchanges in Shanghai, Beijing and Tianjin as centers for state assets trading.
The primary measure to prevent state assets loss is to ascertain the responsibilities of executives, he said.
In November, the commission signed operation contracts with senior executives of 187 SOEs. They regulate four areas of achievement appraisal, including profit and net return of assets. Those who don't fulfill their targets will be punished by being sacked or losing wages.
Li said the most urgent things for 2005 are to accelerate establishment of boards of directors in all state-invested companies, to continue checking and auditing state assets, and to adjust the structure of SOEs.
He reaffirmed that SOEs will be sold or merged if they don't make it into the top three of their respective sectors.
The SASAC, a special branch of the State Council, was established in March 2003 to oversee state assets. It now directly controls 187 central government-invested companies and 9.2 trillion yuan (US$1.11 trillion) in state assets.
(China.org.cn by Tang Fuchun, February 7, 2005)
