Thousands of state firms face closure
Restructuring may take at least five years as failing enterprises are allowed to die
More than 2,500 state-owned companies and mines are close to bankruptcy and need to be closed - a process which may take at least five years because the government must issue unemployment benefit to 5.1 million laid-off workers and pay down 240 billion yuan (HK$222.96 billion) in debt.
'There is still a bulk of enterprises that need to be closed down,' said Li Rongrong, chairman of the state-owned Assets Supervision and Administration Commission (Sasac). 'We will work hard to spend another five years to make those enterprises that are qualified for closure and bankruptcy, as well as mines that are depleted, quit the market.'
While top officials frequently speak of the need to reform the economy by closing ageing steel mills and other state-owned firms, it is rare for an official to set a target and a time frame for such a massive restructuring.
The Third Plenum of the 16th Party Congress has galvanised Sasac to become more aggressive in promoting state restructuring. A Sasac deputy told investors at a recent conference he admired European governments that controlled key industries with stakes of as little as 2 per cent.
Since 1994, the mainland had closed or put into bankruptcy 3,080 companies, written off 199.54 billion yuan to account for non-performing loans, and relocated to new jobs 5.3 million workers who previously had worked at state-owned enterprises (SOEs), Mr Li said.
Indicating the increasingly harsh tone by Sasac towards the privatisation programme, Mr Li said additional work needed to be done. 'The irrational layout and structure of the state economy still has not been substantially reversed,' he said.
He criticised state firms for taking 'too big stakes' in limited liability and joint-stock companies which could have 'a negative impact on the establishment and perfection of corporate governance'.
Small and medium-sized state enterprises have been the biggest beneficiaries of the restructuring programme. He said 80 per cent of county-level SOEs and 60 per cent of municipal-level SOEs had been privatised. The private sector has been the fastest rising sector in China, with growth of 20 per cent annually since the reform process began 20 years ago, compared with an average 9 per cent rise in the general economy.
The private sector was expected to be a big part of the restructuring of SOEs, he said. So far, 8 per cent of private enterprises had acquired stakes in SOEs and another 13.9 per cent were expected to do similar deals in the future, according to a survey by the All-China Federation of Industry and Commerce.
