Contract system to fade out
By ROWENA TSANG in Beijing
CHINA'S contract responsibility system is expected to fade away in the course of the mainland's enterprise reform, according to a member of the Chinese People's Political Consultative Conference.
Wu Jinglian, senior researcher of the State Council's Development Research Centre, said the system could not be considered a modern one in the light of its shortcomings of multi-ownership.
He said the contract responsibility system, because of its short-term nature, would not benefit the long-term development of the enterprises because he found that contractors would gain the most with a rise in returns, leaving the legal owner, or the state, with only a guaranteed amount of profits.
Beijing's Shougang Corp was a case of the contract responsibility system and the mainland steel group was spotlighted on after its Hong Kong chief, Zhou Beifang, was arrested for alleged serious economic crimes.
There has been controversy over the abolition of the system which is considered a barrier to China's efforts to modernise its enterprises.
Mr Wu said enterprise reform, which was given priority by the government, was focusing on a pilot scheme that had selected 100 enterprises for reorganisation.
He expected their restructuring to begin in the second half of this year after the 12 sets of supplementary regulations for the restructuring programme were ready.
Mr Wu said the regulations would detail the arrangement of party officials in enterprises, roles of supervisory commissions and the management of social welfare schemes.
Besides the 100 enterprises, domestic governments are permitted to have their own list of enterprises designated for structural reforms in accordance with their own situations.
Premier Li Peng said in his government report that a system of state-controlled holding companies would be established.
Three state-owned firms - China Petrochemical Industrial Corp, China Non-ferrous Metals Corp and China National Aviation Industrial Corp - are newly restructured to be holding companies.