Rules for town enterprises near to final shape
CHINA will finalise its first set of laws governing township enterprises this year, according to a senior Ministry of Agriculture official.
There has been controversy about the law for 11 years because of the belief that the establishment of township enterprises were transitional in China's development of a market economy.
A vice-director of the ministry's department of township enterprise management, Zong Jinyao, said the need for rules was prompted by the special feature of the organisation and development of township enterprises.
He said the law was intended to provide the enterprises with guidelines in industrial policy and help rationalise their management structure.
Mr Zong said the law would propose a development fund for financing township enterprises and a tax reduction of about 10 per cent for them.
Without protection under the law, the township enterprises tended to be vulnerable to the changing state policy and could not compete with state-owned enterprises in terms of resources and capital allocation.
Owners of many township enterprises included farmers and factory workers.
Mr Zong said fixed assets of the enterprises usually averaged below 300,000 yuan.
As township enterprises were usually of small scale with lower profits compared with state enterprises, banks were not willing to provide them with loans.
Mr Zong said township enterprises had used various sources of financing, with the major portion coming from the peasants themselves.
Between 1978 and 1994, the township enterprises invested more than 90 billion yuan (about HK$82.53 billion) in agriculture development, equivalent of 80 per cent of the total investment from the state.
During that period, they had also pumped 100 billion yuan into basic infrastructure development.
Although the central government did not give any grant to township enterprises, it provided working capital to them in the form of loans.
China had more than 23 million township enterprises, employing 120 million workers.
The total output value of the enterprises reached 3,918 billion yuan last year, with export totalling 330 billion yuan.
Mr Zong said township enterprises accounted for a half of the country's gross domestic products last year.
He said township enterprises would be a source of absorbing the growing excess labour force in the rural sector.
There were 450 million labourers in the farms, but more than a half of them were redundant.
He said the profitability of farms would improve with the migration of the redundant labours to the secondary and tertiary industries.