Wayward enterprises to face stringent controls

China has drafted a law to tighten control over township enterprises which have allegedly strayed from central government edicts.

The bill was yesterday submitted to the Standing Committee of the National People's Congress for deliberation.

It is designed to eradicate malpractice and chaotic administration within the flourishing sector, which has been described as a pillar of China's economy, Xinhua (the New China News Agency) said yesterday.

Hundreds of thousands of the enterprises, which have been set up by rural collective bodies or farmers since the 1980s, generated more than one quarter of the gross national product last year, about 1.45 thousand billion yuan (HK$1.34 thousand billion).

Last year, they paid a total of 205.8 billion yuan in taxes, with an annual rate of increase of 43.1 per cent over the past five years.

However, many of them have also been notorious for evading taxes, wasting natural resources, pollution, neglecting labour safety and selling fake or shoddy goods.

Under the draft law, such offences would be penalised more severely.

'We should solve all these problems by formulating laws. The draft was designed to standardise the development of the enterprises,' Liu Suinian, chairman of the legislature's financial and economic committee, was quoted as saying.

Noting the 'difficulties' in the sector, Mr Liu also criticised some regional cadres who had charged exorbitant fees from township enterprises and illegally used their assets.

'Central government policies to aid the development of the enterprises have not followed legal guidelines,' he said.

He said rural enterprises in impoverished parts of the country should be given more financial support.

Under the draft, all township enterprises would have to earmark a certain portion of their after-tax profit for the cash-strapped farming sector.

In return, they would be given preferential tax policies and more low-interest loans.