Minister says the government will focus on managing only 196 large enterprises China's privatisation chief faced the media for the first time yesterday and made it clear that the government would push through reforms of state-owned enterprises (SOEs) despite the Sars crisis. Li Rongrong, the minister in charge of the State Asset Management Commission, announced the government would focus on managing only 196 large SOEs. The rest would be left to local governments to either sell off or restructure. The privatisation commission was established in March as part of a new round of restructuring by the State Council. 'Our job is to further strengthen the positions of a select few state-owned enterprises,' Mr Li said at a press briefing at the State Council Information Office. 'No country in the world has as many state-owned firms as China does.' The mainland has 170,000 SOEs with assets worth 6.9 trillion yuan (HK$6.5 trillion). Mr Li acknowledged that there were formidable challenges ahead for his commission and reforms of the state sector must proceed cautiously to avoid fuelling unemployment. 'Otherwise, there will be social turmoil and unrest,' he said. The central government started shutting down inefficient SOEs in the 1980s, laying off millions of workers in the process. The unemployment rate, which used to be merely 1 or 2 per cent in the early 1980s, has worsened to an official figure of 4 per cent. Some economists believe that it could be as high as 10 per cent. Mr Li's main job will be to transfer the daily management of SOEs from the government agencies that own them, into the hands of management teams. The state will continue to be represented on the boards of these firms, but the government can sell out if the shares are no longer worth keeping. Mr Li is also responsible for merging competitive state-owned companies into a group of 30 to 50 multinational conglomerates. These business groups will continue to be owned by the state, while the rest - more than 99 per cent of the nation's 170,000 state-owned firms - will be either shut down or sold off. Mr Li yesterday also introduced his deputy, Li Yizhong, the former chairman of state-owned oil trading firm, Sinopec. The deputy minister said he would focus on making the remaining SOEs the most competitive businesses in their respective industries. Li Yizhong also said he would come up with a new system of evaluating the performance of SOE executives. 'Our evaluation will be based on hard facts,' he said. 'We will link rewards and punishment with economic performance. For those who don't work hard enough, we will remove them and punish them accordingly.' Huang Yiping, the China economist at Citigroup in Hong Kong, said he believed the new commission was serious about SOE reforms. 'The commission will only manage 196 SOEs and leave the rest to local governments,' said Mr Huang. 'This is a good thing. Typically, local governments have a lot more incentive to sell off SOEs and less incentive to protect them. This will mean the rapid acceleration of privatisation in China.'