Revamp to give state firms free rein

CHINA plans to set up a powerful commission after the 15th Party Congress, which starts this week, to help rationalise the moribund state sector in a make-or-break initiative to establish a modern enterprise system, sources say.

Beijing was debating the structure of the new set-up and was considering a giant investment corporation to set guidelines for investment of state assets, but would break away from the tradition of interfering in the day-to-day management of state enterprises, the sources said.

Government intervention in the daily operations - along with unclear demarcation of property rights and inefficient management - is seen as contributing to the ills dogging unprofitable state enterprises.

Easing restrictions on these enterprises and the leadership reshuffle are the twin priorities for leaders at the congress, starting on September 12.

After the congress, more state enterprises would be re-organised, merged or acquired and converted into shareholding companies, industry sources said.

Analysts said the commission would act like any other investor: protect its assets - in this case, the Government's - and ensure they appreciate over time.

'The new body they are looking at is similar to a big investment corporation, whose mission is to make state assets grow in value in a market-based economy rather than meddling in the day-to-day affairs of the enterprises,' a source close to the National Administrative Bureau of State-owned Property (Nabsop) said.

Although now in charge of state asset management, Nabsop - controlled by the Ministry of Finance - has limited powers and has functions which are not adapted to a modern economy.

Sources said Nabsop could be scrapped when the commission was set up, widely expected to be early next year. A Nabsop spokesman said he had not heard about plans to change the bureau's status.

Economists in Beijing and Shanghai said proposals had been made to Chinese leaders to have the commission report to the State Council or National People's Congress.

Analysts said for practical reasons, it was more feasible to have the new body coming under the State Council, which still gives it considerably more powers than Nabsop, headed by deputy finance minister Zhang Youcai.

'Yes, there is a proposal floating around to have a new state assets commission set up under the State Council or the NPC, but we will know what happens to it after the party congress,' said Lu Zhen, deputy director of the Department of Industrial Economics of the China Academy of Social Sciences. Shanghai Association of Economics chairman Yuan Enzhen said: 'The proposal to set up a commission which draws up policy guidelines but cannot interfere in state enterprises is a breakthrough. 'By separating politics from business, we will solve one of the problems long faced by state enterprises - meddling in business by too many government departments.' Shanghai separated government from business through a state assets commission under former party leader Wu Bangguo about three years ago. Mr Wu is now vice-premier in charge of state sector reforms.