Property market must be open to all sectors

PUBLISHED : Monday, 05 December, 1994, 12:00am
UPDATED : Monday, 05 December, 1994, 12:00am

IT is sometimes argued that China's budding property rights market, which is a far cry from being properly regulated, should be limited to private enterprise.

While it sounds as if it will protect public assets, it will in fact be of no help.

Despite the lack of regulation, a property rights trading network has been formed while the authorities are rushing to establish an appropriate legal framework for transaction, acquisition and restructuring of enterprises.

Agents are still working on perfecting their operations as the property rights transfer market develops inexorable momentum.

Many enterprises want to transfer these rights to increase assets, facilitate resource allocation, increase efficient asset usage and diversify into other sectors.

Especially as enterprises convert into shareholding structures and the need to address the risk of bankruptcy, some enterprises desperately need to transfer assets.

Under such circumstances, should we wait for the market to be adequately regulated before allowing publicly-owned investment vehicles to participate in the market, or should we under the right conditions allow them to do so they can benefit from acquisition and/or restructuring? The latter is conducive to the public sector of the economy.

There are three shortcomings to limiting the market to private enterprises.

First, it would be of no benefit to those publicly-owned enterprises which need to transfer their assets to survive.

However it would stimulate those private enterprises which do have higher asset utilisation and fewer problems.

Would that not jeopardise the publicly-owned sector? Thus, both types of enterprises must have equal opportunity to take part in the assets transfers - reflecting the tenets of the market economy.

Second, as publicly-owned enterprises constitute the lion's share of China's overall economy they should have an appropriate share of the assets transfer market, assuming all mainland enterprises are allowed entry into the market.

If the market were limited only to private enterprises, trade would be too limited to stimulate the market and delay enhancement publicly-owned enterprises at the expense of the public sector.

Third, banning publicly-owned enterprises from buying or selling assets will not stop the loss of public assets.

On the other hand, allowing them to make property rights transactions under strict control may put an end to the problem.

Both public and private enterprises should be allowed to make assets transactions to perfect, develop and regulate the market.

Professor Li Yining is head of Beijing University's department of economics and management and is a standing committee member of the National People's Congress.