Increase in reform of small firms

MORE small-sized state-owned firms will move towards the marketplace this year as China steps up its enterprise reform.

They will be allowed to transform themselves through measures including the formation of share-holding companies, leasing, contracted operations, mergers and bankruptcies.

Guangdong will sell off 100 small state enterprises in an attempt to reform their structure.

And workers will be permitted to hold shares of these companies, the semi-official Hong Kong China News Agency reported yesterday.

Guangdong also aims to have half of its 30,000 or so small-sized enterprises transformed within the year, and complete reform for the other companies the following year.

In Shanghai, 20 small-sized enterprises will be sold in the property rights market in the first half of this year.

Another 300 firms will be put for sale over the next five years, the news agency said.

Shanghai, with almost half of its small-sized state firms suffering losses, has also decided to turn 20 such enterprises into share-holding concerns each year.

Sichuan, meanwhile, aims to complete the transformation of 60 per cent of its small-sized state firms this year.

But letting the small-sized state firms go on to the market did not mean privatising them, the news agency stressed.

Quoting authoritative sources, the report said the ownership reform could make small state enterprises more flexible in their organisation, operation and management.

Economic experts said despite the authorities having adopted a number of measures to reform state enterprises, the majority of small firms had not been performing well.

In 1994, 20,000 small-sized enterprises made losses and they constituted 80 per cent of the total of money-losing state firms, the report said.

Many of the state's assets in these small enterprises were found to have been siphoned off, while the amount of debt borne by small firms was growing.

In some counties, the amount of debt was nearly equal to a company's total assets.

Due to financial constraints, local governments were unable to provide subsidies to debt-ridden state companies, the report said.

Experts said reform of small state firms had to be speeded up as they were a major support to the economic development of over 2,000 cities and counties across the country.

About 80 to 90 per cent of the state enterprises in the country are small, and they employ 60 per cent of the total labour force.