Proposal to privatise state firms

PUBLISHED : Wednesday, 16 November, 1994, 12:00am
UPDATED : Wednesday, 16 November, 1994, 12:00am

THE Chinese leadership is debating a radical reform initiative that will turn all state-owned companies in urban areas into 'Western-style' shareholding companies in three years or more.

It is understood the experiment, already in place in the Shenzhen Special Economic Zone (SEZ), will be tried out in the coastal cities first.

Industrial sources in Shanghai said the metropolis had mapped out plans for converting government-owned companies into share-holding units with limited liabilities by the end of 1997.

However, fierce debates have broken out within the leadership over how the reforms would be attained.

While there is a consensus that only a small minority of the transformed state firms should be floated on the stock exchange, disagreements have occurred over the percentage of shares the state should acquire.

Beijing and Shanghai economists said conservative leaders had insisted that the state hold about half of the shares.

More liberal cadres and advisers, however, had suggested the Government need control only 20-odd per cent of a typical company, with other shares to be held by companies where the 'public sector' has a majority interest.

More problematic is the role to be played by party organisations in the new-look state enterprises.

The recent Fourth Plenum of the party Central Committee stressed that party cells be 'resuscitated' and that they should play leading roles in factories.

Sources close to the State Commission for the Reform of the Economic Structure, which is co-ordinating the experiments, said one solution proposed was to follow the Shenzhen model.

In the SEZ, leading functionaries in the party cells of state enterprises have been absorbed into the newly created Supervision Committees of the shareholding companies.

Such committees oversee the boards of directors, which have displaced party cells as the highest authority in enterprises.

The sources said, however, that this plan had encountered opposition from ideologues as well as party specialists who feared a dilution of authority.

Another bone of contention is the status of the official trade unions and their offshoots, the congresses of worker representatives (CWR).

Under the existing system, CWRs in state factories, particularly the larger ones, have a say in worker welfare and production targets.

In shareholding companies, however, there is not much room for trade unionists or labour representatives wielding real power.

One solution proposed by experts in Shenzhen is to encourage workers to buy shares, so that they can exercise supervisory powers in general meetings of shareholders.

Sources said the future direction of enterprise reform would be discussed at the National Work Meeting on the Economy in Beijing later this month.