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Carrie Lee

BEIJING is cracking down on state enterprises that plan to inject assets into their overseas investments by forcing them to register with the authorities, according to a pro-Beijing newspaper.

  Analysts say the Government's regulations seek to rein in the nation's loss arising from mainland companies valuing assets too cheaply and taking them abroad - usually to Hong Kong - as capital investment to attract overseas partners.

  The curbs are timed to take advantage of the central Government's moves to restore power over local governments under Vice-Premier Zhu Rongji's austerity plan, observers say.

    The report in yesterday's Wen Wei Po newspaper said the measures were aimed ''to protect the country's rights and strengthen registration and administration of the country's assets in overseas enterprises''.

  Under the new regulations, state enterprises that set up overseas joint ventures or co-operatives with injection of mainland assets as capital must register with the National Administrative Bureau of State-Owned Assets (NABSOA).

  The assets to be exported - such as machinery, equipment and raw materials - must be valued and the value endorsed by the NABSOA.

  If the submitted valuation is less than the NABSOA figure, the enterprise must seek the approval of relevant authorities.

     If the valuation submitted by the enterprise is higher than the NABSOA's, the case will be handled with reference to local law, according to Wen Wei Po.

  Once approved, it must also register the transfer of the rights of the assets at the value stated on the contract with the overseas firm within a designated time.

    The overseas enterprise with Chinese assets injected into it is also required to register the transfer at NABSOA and produce the ''approval certificate'' awarded by the Ministry of Foreign Trade and Economic Co-operation. This shows the state's approval for the venture.

  ''The new regulations appear to set out to tackle the problem of under-valuation of exported assets which has become a concern for the central Government,'' said Tsang Shu-ki, senior lecturer in economics at Hong Kong Baptist College.

  State enterprises started to invest abroad during 1990 and 1991 when the country relaxed control of foreign investment.

   Patriarch Deng Xiaoping's visit to southern China last year was an additional impetus.

  But as the enterprises lack foreign currency, they often inject assets into the overseas ventures as investment.

  ''Managements of mainland enterprises are very anxious to set up businesses abroad because they think that will do them a lot of good,'' said Mr Tsang.

  ''And as they're so keen to secure foreign partners they tend to offer their assets at a value below what the Chinese Government thinks is fair.

  ''In a way, that represents a loss of the mainland's assets and thus economic loss for the country.''   The latest regulations seem to target movable assets. But the problem with immovable assets such as land was equally serious, he said.

  ''I won't be surprised if they introduce measures to deal with that [land] later,'' said Mr Tsang.

  Under-valuation of assets is a long-term problem generated by China's economic reforms, distinguished from the cyclical economic overheating on which the state is trying to clamp down.

       But measures to combat both problems have been launched at about the same time.

  ''China works like this: in times of economic reforms, local governments have a lot of autonomy. But when the economy is overheated, the central Government imposes a crackdown and the bargaining power swings back to the central Government,'' said Mr Tsang.

  ''That's the time that the central Government, with more power, would like to take advantage of to implement other policies [that might upset local governments],'' he said.

  When the mainland enterprise takes the assets out of the country, it has to show the ''approval certificate'' and other registration documents to customs.

  The regulations did not affect overseas ventures that had signed an agreement on the value of the assets and equity distribution, said the report.

  Mr Tsang warned that the measures could be difficult to monitor.



Beijing acts on asset loss abroad