WHILE China is allowing state-owned enterprises to acquire and merge with one another on a limited scale, it is not without reservations, a finance specialist says.
Arthur Andersen's senior consultant for corporate finance, William Yuen, said yesterday China's major concern was the loss of state-owned assets in mergers and acquisitions of state-owned enterprises.
Mr Yuen said differences between China's accounting practices and international methods meant enterprises could be significantly undervalued when they underwent asset restructuring.
An earlier study by the National Administration of State-Owned Property said property worth 300 million yuan (about HK$278.7 million) vanished each day through asset restructuring that involved foreign-funded companies.
To better utilise resources, China offers tax and other benefits to encourage better-managed state enterprises to merge with loss-making operations.
The recent auction of Shanghai-based, state enterprises was one example.
Mr Yuen believed the mergers of enterprises, although under restrictions, would enhance efficiency in the state sector through better resource allocation.