Beijing has unveiled a policy guide to help state-owned enterprises (SOEs) become more competitive now that China is a member of the World Trade Organisation. The document, drafted by the State Council's State Economic and Trade Commission and seven government departments, was published a month after Vice-Premier Wu Bangguo said China would nurture up to 50 giant enterprises into internationally competitive companies within four years. The guide encourages state-owned enterprises to list on domestic and foreign stock markets and raise funds from multiple financing channels. Stock market listings are promoted as a means to reform inefficient enterprises as the 'game rules' and competitive behaviour of capital markets force companies to become more efficient, responsible and transparent. The document urges state-held enterprises to sell to the international market and set up overseas operations. Simpler approval procedures on export credit insurance, overseas investment and foreign exchange transactions are also called for. Entering the WTO has posed a severe competitive threat to China's enterprises, making it more urgent to groom internationally competitive companies. 'In capital and technology-intensive sectors, Chinese enterprises are facing strong competition from large multinationals,' the document says. However, it emphasises that corporate growth should be based on market economy principles and warns against government-directed mergers regardless of complementarity. The document also answers criticism of past government-arranged 'marriages' of companies. 'Complete hands-off stance by the Government in [enterprise] restructuring is impossible, but some local governments forcing companies to merge in order to quickly scale them up or to relieve themselves of [financial] burden, have resulted in poor results,' it says. Many companies have been forced to merge with less efficient ones in the belief that size was a key to competitiveness. This often resulted in more bloated and inefficient companies. The forced merger of Shanghai Shenyin Securities and Shanghai Wanguo Securities in 1995, after the latter incurred huge losses in a treasury bond scandal, is just one example. The merger cost both companies several years of restructuring agony. The aviation sector is undergoing a drawn-out wrangle between major airlines and the Civil Aviation Administration of China over merger proposals laid down by the regulator. The country's three largest airlines - China Southern, China Eastern and Air China - have been asked to take over seven regional airlines to end route overlaps and over-capacity problems. However, some airlines have reportedly had difficulty accepting their designated 'marriage partners' due to their debt problems. Bob Zhang, a Beijing-based economist for BNP Paribas Peregrine, said although the aviation industry consolidation was government-led, the fact that airlines have been allowed to negotiate with each other on the merger terms was a sign of improvement from previous government-ordered mergers. The guide also addresses the common problem of rampant expansion among state-owned enterprises. 'Many state-owned enterprises have been pursuing expansion blindly, [resulting in] investment blunders and the piling up of heavy debt,' it says. The red-chip sector has seen many conglomerates expand aggressively in the latter part of the past decade into sectors unrelated to their core business. Many have gone through several years of restructuring, involving asset swaps and disposals, to refocus their operations back to their original business.