Meet Yin Baohai. Five years on from the Communist Party's 15th Congress he will be one of China's new millionaires, driving a Lexus and taking family holidays in California. Or he will be bankrupt. Mr Yin is one of the new class of entrepreneurs envisaged by the giant sell-off of state assets approved by the 2,000 delegates at the congress. He used 430,000 yuan (about HK$399,470) of his own money and borrowed a further 1.3 million yuan from friends to buy a 51 per cent share of a foundry in Songzhuang, a Beijing suburb, of which he used to be the manager. 'I am paying them 10 per cent interest a year,' said Mr Yin, sipping tea out of what used to be a fruit jar in the factory's main reception room, full of medals for its products. The other 49 per cent of the shares were bought by 22 managers and 186 of the 1,000-strong workforce. They and Mr Yin have paid 3.39 million of the 11.68 million yuan needed to buy the plant. They must pay the rest over the next five years. Such worker-management buyouts are one of the main forms of sale of small and medium-sized state companies set out in the report to the congress by President Jiang Zemin. Tens of thousands of village and township enterprises have been sold in east and south China, the richest areas of the country and the first to set up such companies in the early 1980s. Songzhuang county has sold all the 10 factories it owned, with the managers taking a controlling share in most cases, as with the foundry. 'The workers prefer it that way because they see that the manager is putting himself on the line,' Mr Yin said. 'If the manager buys only a small share, the workers ask the reason.' The 22 managers each paid an average 61,000 yuan, giving them 39.3 per cent of the shares, and the workers bought the rest, paying between 500 and 30,000 yuan, giving them 9.7 per cent. Only the 500 workers of the county were eligible to buy shares, because the other 500 are migrants unlikely to stay in the area for long. Of the locals, 314 workers did not buy for lack of money or interest or because they did not want to tie up capital in an illiquid instrument. The 11.68 million yuan price of the factory's net assets was set by the local valuation department. While the shareholders pay off the remaining 8.28 million yuan they owe, Mr Yin plans to pay no dividend. Annual profits in the 1990s averaged two million yuan. Sales in the first eight months of this year were 37.8 million yuan, with more than 95 per cent of output exported to Japan, South Korea and Singapore. For Mr Yin personally, it is a financial gamble. If he pulls it off, he will be the owner of a substantial company. If he fails, he will be ruined. In Mr Yin's company, the workers had the choice of whether or not to buy the shares. In others, the choice is buy the shares or leave the company. A Shanghai bank official said: 'Two years ago my father and mother each paid 5,000 yuan to buy shares in the textile company in Nantong [Jiangsu province] where they work. 'It was compulsory. Everyone had to buy. The shares are not tradeable, even to other workers in the same plant.' His parents have received an annual 2 per cent dividend, less than if they had kept the money in the bank. Control of the company rests with the local government which appoints the management. There is no improvement. At the shareholders meeting, the workers have the right to criticise the management but who dares? You will be the one to suffer. The cynical view is that selling such non-tradeable shares to workers is compulsory savings, forcing them to take the money out of the banks and giving it to the state, as a way to rescue unprofitable state firms, while the state retains majority ownership and management control. Individual bank deposits had reached 4.27 trillion yuan at the end of June, up 19.6 per cent over a year earlier, and far more than the banks can lend. The banks pay depositors interest on much of this money but receive no income from it. So the transfer of a substantial portion of these deposits into shares of companies makes good macroeconomic sense. The workers are likely to have to hold the paper for a long time because only a small number of companies will be publicly listed. The government says new listings cannot increase quickly because firms must meet listing requirements, be of good quality and properly audited and because the market can only absorb a limited amount of new paper. With managers and workers only able to buy a small portion of shares in large companies, the rest will have to be sold to institutional investors. The price would be much lower if the shares were not tradeable and were not likely to be, a Chinese economist said. So the success and speed of the sell-off of these companies would be largely determined by the pace of new listings and how far Beijing was prepared to allow trading outside the two national exchanges in Shanghai and Shenzhen, the economist said.