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Elaine Chan

MANY of Dalian's 600 state-owned enterprises are debt-ridden and burdened by outdated technology and poor management skills, but the city is not about to abandon its economic backbone.

  The enterprises pose a dilemma for the city, being both an economic mainstay and a brake.

  The downside is low efficiency and rusty machinery but the enterprises are also a wellspring of Dalian's skilled labour force and expertise.

  To revive the old enterprises and make them competitive is a hard nut to crack.

  Compared with the technology in southern China, state-owned enterprises in Dalian are old and slow.

  Dalian Economic Committee deputy director Bi Shiguang said: 'Products are of lower standards and have to compete with imported better quality products.

  'As a result, there is little attraction for products from our enterprises.'   Since 1949, the state-owned enterprises have supported thousands of people from cradle to grave, but austerity measures have driven many enterprises to the wall as cash flow took its toll.

   Dalian's state-owned enterprises, with assets worth a total of 27 billion yuan (about HK$25.16 billion), are burdened by debts.

  There are about 100 large and medium-sized enterprises and the latter type is commonly burdened with debt of 500 million yuan each. Municipal leaders hope to revitalise industry through the 'marry and connect' policy, inviting foreign investors to take a major or minor stake in the enterprises.

  'We will invite foreign investors to take stakes in our state-owned enterprises,' Mayor Bo Xilai said.

  'We will calculate how much the assets are worth, and how much the foreign investors are willing to pump into the enterprises will determine their stake in the enterprise.'   American tyre giant Goodyear has taken a stake in Dalian Rubber Factory which produces an average of 1.5 million tyres a year.

  Dalian Economic System Reform Committee director Diao Chengbao said another way forward would be to concentrate on quality products acceptable to a bigger market.

  An alternative, he said, would be to 'have these enterprises linked up with the major mainland conglomerates'.

  Rough estimates indicate that 20 enterprises will have to declare bankruptcy. Four this year alone will cost 10,000 jobs.

  One medium-sized enterprise with assets worth 20 million yuan was declared bankrupt last year at the cost of 1,000 jobs.

  Mr Diao said such closures were less common with large heavy-industrial enterprises.

  It was one thing to declare bankruptcy to improve circumstances but the hardest part was resettling affected workers, city officials said.

  City officials conceeded that this is hardest bit of the process.

  'In Dalian, three workers provide for a retired old worker. That's the situation and we are especially concerned about the medical benefits,' Mr Diao said.

  A special fund has been established to retrain workers. About 110,000 workers have been resettled in enterprises in an attempt to shake-up enterprises.

  An emerging trend shows old enterprises moving out of the central city district to the outskirts to make way for new commercial developments.

  About 20 enterprises have been planned for such a move this year.



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Bo Xilai

State-owned firms backbone of city