Small state firms to be sold off

PUBLISHED : Tuesday, 05 March, 1996, 12:00am
UPDATED : Tuesday, 05 March, 1996, 12:00am

CHAN PREMIER Li Peng has given local governments the green light to dispose of small and medium-sized state enterprises in ways that best suit the interests of different provinces in his government work report.

This is in accordance with the principle of 'giving support to and developing the large enterprises and letting medium and small ones go free [of state control]', a centrepiece of the Ninth Five-Year Plan.

Officials responsible for reform said the focus for this year was invigorating medium and small-scale business units.

Reforms of large-scale enterprises would be left for a later stage.

Despite controversy over ownership rights and reluctance to allow debt-laden enterprises to go bankrupt, local governments have had a field day getting rid of money-losing state enterprises.

Starting last year, provincial governments have tried to relieve themselves of financial burdens by selling and renting small and medium enterprises to private investors or letting them merge or go bankrupt.

Both robust enterprises and companies dripping with red ink are on the selling list.

The governments of Quanzhou, Shunde, Dalian, Ningbo and Sichuan are among the most active.

In the past two months, many small-scale state enterprises have been sold to their workers and have become share-holding companies.

Beijing sources disclosed that Chinese leaders believed that it would take at least 10 years for small and medium enterprises to achieve visible results by such reforms.

The central Government has to set aside a big budget to maintain state enterprises.

These expenses include 21.9 billion yuan (about HK$20.37 billion) to subsidise losses.

Moreover, 59.5 billion yuan will be used to finance production infrastructure and 49.6 billion yuan to finance enterprise reform and new research and development.

A large part of the above funding will actually be channelled to facilitate small and medium-enterprise reform. Some will be used to pay off enterprises' heavy debts if they go bankrupt.

Although Mr Li has indicated that the state will develop 1,000 large-scale enterprises, officials said this was only a rough figure.

There are now more than 4,000 large-scale enterprises in the country.

Officials said that Chinese leaders hoped that private enterprises would expand over the next 10 years.

By then, these emerging private enterprises might have enough capital and operational experience to take over some of the large-scale state enterprises.