Struggling firms win help with repayments
CHINA has taken new measures to help tide struggling firms over the bad times by ordering local Governments to subsidise their interest payments, Vice-Premier Zhu Rongji has revealed.
The move is part of the revised strategy adopted by the State Council to relieve the dearth of floating capital for enterprises, the economic supremo said.
According to Xinhua (the New China News Agency), Mr Zhu visited the coastal province of Zhejiang to study the grain purchase and retail system and learn about the difficulties facing state firms.
He admitted that enterprises were facing a shortage of circulating capital as a result of the tight money-supply policy of the central Government.
Mr Zhu attributed the problem to excessive fixed-assets investment as well as multiple debts brought about by the sharp drop in the production and sales of industrial products.
The State Council has already taken the lead in joining with banks and other relevant departments to clear the debts, he said, adding he was confident that the problem would gradually be overcome.
Mr Zhu pointed out the State Council had also ''adopted some adjustments'' to the credit policy over floating capital for enterprises.
Banks can give loans to loss-making firms for them to meet the basic living expenses of workers, he said.
But local governments will have to subsidise the interest incurred on the loans, said Mr Zhu.
Xinhua did not specify whether all the interest payments should be borne by the local treasury.
''The central and local governments should jointly maintain social stability,'' he said.
Mr Zhu reiterated that enterprises that suffer losses over a long period and have no prospect of reversing the trend should go bankrupt in accordance with the law.
''We should introduce a trial system in some places before promoting it,'' he said.
The senior leader maintained that banks would continue to provide credits to state firms whose products would have market potential and cost-effectiveness.
Even firms that were debt-ridden, Mr Zhu said, should be given credit for floating capital in the production of goods that could be sold.
''But we must never give loans to support the production of goods that have accumulated because there is no longer a market for them,'' said Mr Zhu.
He indicated that one of the lessons drawn from the grain crisis last year was the importance of reasonable grain prices to encourage farmers to produce crops.
Prices should be determined in accordance with the supply and demand situation in the grain market, Mr Zhu noted.
Government at all levels should maintain supervision and regulation over grain prices, he said, but added that such control should not dampen the dynamism of market.
This would help maintain stability of prices by avoiding fluctuations, Mr Zhu said.
He stressed that state-owned shops should maintain adequate supplies of grain.
The Vice-Premier said legislation should be enacted to stop farmland being abandoned.
Experienced farm workers should be encouraged to exploit the resources of abandoned farmland.
Mr Zhu said it was common in coastal regions for peasants to quit farming after becoming rich.
These regions had relied on purchasing grain at higher prices from other provinces and from abroad. But he stressed that put unbearable pressure on land resources, the total supply of grain and foreign exchange reserves.