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Yuan Qingxiang, in his 50s, is celebrating a wise choice he made six years ago.
At that time, he decided to support a little-known entrepreneur in the landmark and arduous task of purchasing a state-owned switch plant, a move that was being railed at by the plant's other workers.
Now Yuan is the director of equipment supply and maintenance for Changchun Hongguang Industry Co, the successor of that once nearly-defunct plant, and laughs his way to the bank with a monthly salary of 1,500 yuan (US$181.4). "It's much more than a freshly graduated student can earn," he says smiling, "let alone thousands of laid-off workers in the city."
"We were proven right," he said.
Meanwhile, his boss Sun Gengjie, 44, drives her Audi A6 to business meetings and is welcomed everywhere in Changchun, the capital city of Northeast China's Jilin Province.
Sun and Yuan are the beneficiaries of massive efforts launched by Changchun, a traditional heavy industry base, years ago to restructure its ailing state-owned enterprises (SOEs).
Few private funds made their way into SOEs at that time since there was apprehension about the role of private ownership.
However, the situation has changed.
With the central government launching a revival of the old industrial base and increasingly booming private businesses in the country's northeastern region, private entrepreneurs find they are being welcomed with open arms to join the SOE restructuring campaign.
After initial success in reforming the SOEs on a trial basis, Jilin Province is pressing ahead with its massive campaign to reshuffle most of its SOEs.
"We plan to finish restructuring all SOEs in Changchun by 2006," said Changchun's Vice-Mayor Cui Jie.
"Generally speaking, small- and medium-sized SOEs will be open to private investors," Cui added.
Jilin City, the second-largest economy in the province, announced a similar timetable.
The Jilin municipal government is determined to basically complete the restructuring of 172 city-level SOEs within two years.
"The State will no longer be the major shareholder of these enterprises," Zhu Tianshu, assistant to Jilin's mayor, told China Daily during an exclusive interview.
"Some of them will go bankrupt, and about half of them will be reshuffled and their ownership will be diversified," Zhu said.
The two cities, contributing to 77 percent of the province's gross domestic product (GDP) in 2003, are appraising the assets of SOEs and making them available for private investors through market- oriented means such as bidding and auctions.
Analysts say reshuffling the ailing SOEs is at the heart of recent efforts aimed at "reviving the economy of Northeast China," and letting private investors participate is undoubtedly a good way to help revive struggling SOEs.
Backed by the central government and encouraged by the initial success, Changchun is making efforts to solve the biggest bottlenecks - debts and laid-off workers - that worry private investors looking to participate in SOE reforms.
"The price of an enterprise will have to be subject to the market," Cui said. "It is the reflection of its net assets, but not the value on the balance sheet."
The mayor also said the government will not ask purchasers to meet a certain employment goal after they own the enterprise.
"In the past, we improperly pursued an employment rate and imposed a much harsher requirement on those taking stakes in SOEs.
"Now, we only ask them to do their best to hire the workers of the SOEs they buy, and we only give a suggested goal of hiring 70 percent of the firm's old employees," Cui said.
The government will be responsible for solving the debt and employment issues, he said.
Sun has been the beneficiary of this plan.
"Now the private investors face a better chance," she said. "They don't have to take over the debts and employment pressure after they buy an SOE," Sun added.
"I was not that lucky when I bought the switch plant," she recalled. "I swore dozens of times that I would shoulder all the debts and would not fire any of the plant's workers before I finally owned the plant."
In 1999, the tough woman had to sell her house to pay off the company's debts and maintain the salary of an inflated amount of workers.
"My parents, in their 70s then, had to live in my office for almost two years before the plant turned to make profits and I could buy them a new house," she said. "If I could enjoy the preferential policies as we currently can, I would not have been that helpless at that time,"
Jilin soothed private investors' worries by initiating a lease-operate-transfer mode (LOT).
"They (private investors) can choose whether to purchase the stakes after they have rented the SOE and run it for a period of time," Zhu said.
Encouraged by preferential policies, private investors have shown great interest in this unusual opportunity, which they term as "the last free lunch."
"I will not let the chance go," said a taxi driver. "I can feel this time the government is genuinely determined to let private business participate in trimming these SOEs."
The driver, in his 20s, said he and a couple of friends are raising money to purchase stakes in an SOE in the auto parts business.
Zhang told China Daily many SOEs look promising, although they are struggling to come out of stagnation.
"What they lack is nothing but capital and modern corporate governance," Zhang said, believing the entry of private funds will rescue a number of collapsing SOEs in Changchun.
Sun told China Daily she wants to purchase a 10 to 20 million (US$1.21-2.42 million) stake in Jilin Diesel Engine Plant, a large SOE that has halted production for years.
"The plant's resources are quite good," she said. "I am confident I can reactivate it with efficient management and my abundant client resources," she added.
"I know how to rejuvenate these SOEs," Sun said.
The SOE Sun purchased with 2 million yuan (US$242,000) in 1998 notched up a revenue of 32 million yuan (US$3.87 million) in 2003, and is set to make an impact in the high-tech business.
Small- and medium-sized SOEs, the main target of the reform, also have a clear view on the situation and are looking for cooperation with private investors.
Some of them have flown like a phoenix from ashes through the ownership diversification.
Changchun-based Xuyang Group, established in 1999 as a result of a merger of a few smaller SOEs, is set to sell 20 percent of its stake to a Ningbo-based private company Huaxiang Group.
"The move will help us lower our state shares to 52.3 percent next year," said Shen Lijie, assistant to the general manager.
Huaxiang's entry is going to help the auto parts manufacturer enter the country's southern markets, Shen told China Daily.
And more importantly, the purchase is expected to push Xuyang's long-time go-public plan ahead.
"The restructuring of the company is aimed at a listing in the Shanghai A-share market," he said. "This will help us raise 250-300 million yuan (US$30.12-36.14 million) and put the company operations on a market-oriented path."
The company is considering filing for bankruptcy for part of its affiliated companies, which are all State-owned or controlled.
"We will not waste time on them," said a determined Shen.
In addition, even successful state-owned companies, which have been excluded from the government's ownership-diversification list, have begun to make attempts to take in non-State capital.
"We are trying to attract private and foreign funds," said a source from the Jilin Cereals, Oil, Foodstuffs Import and Export Corp, one of China's only two grain exporters.
"We have made some achievements in this regard," he told China Daily, "some of our affiliated companies are no longer wholly state-owned."
But he also said his company lags far behind his "elder brother," China National Cereals, Oil, Foodstuffs Import and Export Corp, the country's biggest grain trader.
"SOEs in Northeast China are somewhat slow in reforming and restructuring," he said. "But we are catching up."
(China Daily April 28, 2004)
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