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Q: It is reported that during the reform of SOEs, some managers became millionaires or even billionaires by pocketing large amounts of State assets. Please explain what caused the losses of State assets and what measures will China take to stop it.

A: The situation you mentioned does exist, but those are individual cases. Since the nationwide introduction of property rights reform in 1993, State assets in small- and medium-sized SOEs in ordinary economic sectors have been phased out in different batches. The purpose of the reform is to optimize ownership structure and improve efficiency.

Yet during the process, supervision loopholes have resulted in a drain of State assets in certain enterprises. Some managers have illegally diverted State assets into their own pockets and became rich overnight.
 
Loss of state assets has become a grave problem hampering the reform and development of SOEs. The major reason is unclear property rights.

In China, the ownership rights and interests used to be artificially allocated to local governments at different levels, departments of the central government and individual enterprises. State assets were owned and managed by every one and yet no one. The ambiguity resulted in the misappropriation of State assets by institutes and individuals. And some individuals have taken the loopholes it created to their own advantage in the reform of property rights reform.
 
In order to avoid further drain of State assets, the central government has taken strict measures.
 
First, standardized procedures in reforming SOEs have been enforced. Regardless of the forms adopted in reform, all companies should first carry out assets liquidation and hire a qualified third-party agency to conduct assets assessment. Any sale of State assets must be approved by their owners and be conducted through bidding or other market means. When managers want to purchaser their own enterprises, all assets must be audited to guard against them from embezzling State assets by using their power.
 
Second, Reform plans and procedures must be made more transparent. Opinions and suggestions of the congress of employee representatives must be heeded. Results of liquidation, auditing and implementation of reform plans must be made public to all employees.
 
Third, State assets administration departments should supervise assets liquidation and auditing. They must strengthen management of assets auditing agencies, checking their qualifications and guaranteeing accuracy of auditing reports. They must also assist other relevant government departments in the investigation of State assets embezzlement cases.

Fourth, Criminal charges must be filed against those who illegally take State assets into their own possession. And the lost assets must be retrieved.