State-owned firms to face faster cuts

PUBLISHED : Monday, 14 March, 2005, 12:00am
UPDATED : Monday, 14 March, 2005, 12:00am

Drastic reduction seen as crucial to the nation's reform drive

A pledge to speed up the restructuring of state-owned companies has been made by a central government department.

The Assets Supervision and Administration Commission is pledging to bring the 179 companies under its direct supervision down to about 80.

Commission director Li Rongrong said the final bunch of state companies would be confined to industries of strategic significance to the economy, which includes banking, power, petroleum, telecommunications and aviation. 'As for the rest of the state-owned enterprises, they should either be sold off, contracted out or be incorporated into and merged with each other,' Mr Li was quoted as saying by Xinhua.

He said the drastic reduction in state-owned enterprises was crucial in the country's drive to build a modern enterprise management regime and eventually achieve the goal of ownership diversification.

The average level of state assets in the national economy is about 5 per cent in developed countries and 10 per cent in developing countries, while in China it will still be as high as 30 per cent by the end of this year, according to official figures.

Mr Li reiterated his commission's determination to produce 30 to 50 giant enterprises and group companies, on a par with international standards, within five years.

The government has been vowing to create industrial conglomerates like Japan's Sony and South Korea's Samsung since the introduction of the reform policy. In recent years about 20 of the commission's original 196 central state enterprises have been merged into larger group companies, with more deals planned.

The Xinhua report said the country's two steel giants, Anshan Steel and Benxi Steel, were reviewing the possibility of a merger.

It said Mr Li had given an ultimatum to the 179 state enterprises under the direct control of his commission. Those that failed to improve their corporate efficiency to become the top three players in their respective industries would have to be restructured, he said.

These companies include industry monopolies such as Sinopec, State Power, First Auto, China Mobile and China Aerospace Science and Technology Group, most of which are dominant market players in their domains.

But most of them retain the features of a planned economy, with problems of overstaffing, low efficiency and heavy debt.

The commission was established in March 2003 in a major reform to manage the country's problematic state-owned enterprises, which absorbed 80 per cent of its total resources but contributed only 40 per cent of the industrial output.

Although much of the commission's work is in practice a privatisation programme, most of the time it is referred to as either a 'state asset restructuring', 'system reform' or 'corporatisation'.