Wednesday's executive meeting of China's State Council decided that when the condition is ripe, bankrupt state-owned enterprises (SOEs) will be left to the laws and market.

This means the government will stop subsidizing bankrupt SOEs, moving further towards the socialist market economy.

So far, Beijing, Shanghai, Jiangsu, Zhejiang and Fujian have stopped the practice.

Currently, the government subsidizes a selected group of state-owned enterprises in extreme financial difficulties. In return, these SOEs are asked to properly arrange laid-off workers' livelihood.

By April 2004, China had closed 3,377 insolvent SOEs through administrative intervention and resettled 6.2 million employees. In this process, the government had allocated 49.3 billion yuan as SOE bankruptcy subsidies and allowed state-owned banks to write off a total of 223.8 billion yuan of bad loans caused by SOEs bankruptcies.

Li Rongrong, minister in charge of the state-owned Assets Supervision and Administration Commission (SASAC), said earlier that the period of transition from policy-aided bankruptcy to bankruptcy according to law would take about four years.

The State Council meeting, chaired by Chinese Premier Wen Jiabao, also approved in principle a program dealing with the closure and bankruptcy of SOEs, a program on rural highway construction and the draft of regulations on the supervision of the electricity sector.

The meeting urged all localities and departments to handle the closure and bankruptcy of SOEs strictly in line with the legal procedure to prevent the loss of state assets, protect the legal rights and interests of workers concerned and properly handle the debts.

"Meanwhile, enterprises with the right conditions are encouraged to merge with others," according to the meeting.

The government intervention to save bankrupt SOEs is a special arrangement adopted to solve historical problems.

(Xinhua News Agency February 3, 2005)