IN a huge overhaul of its corporations, China plans to convert about 55 conglomerates to firms that will emulate the success of the Japanese sogososha - groups like Mitsubishi - the structures that are regarded as one of Japan's engines of commercial and export success. The pilot project will be co-ordinated by the State Economic and Trade Commission (SETC), the State Planning Commission and the State Commission for Economic Restructuring. Most of the state enterprises taking part in the project are on China's list of top 1,000 corporations in terms of turnover or sales. Two enterprises in the experiment - Yizheng Chemical and Tianjin Bohai - plan to list in Hong Kong, having been among the first nine mainland companies given the green light to float in the territory. ''The idea of the plans is to nurture large-scale players to compete in international markets,'' said Rick Yan, general manager of management consultancy Bain & Co China, which recently ran a two-day seminar with the SETC on how to manage state enterprises. More key state enterprises will join the scheme - if it is successful - as China aims to have 100 conglomerates which can compete effectively in international markets by the end of the decade. Mr Yan said that, partly because of provincial protectionism, many Chinese state enterprises were forced to operate within the provinces where they were based. With the plans to set up conglomerates, they would have to spread and break into other provinces. To push through the plans, the enterprises chosen for the path-finding role would be given the impetus to break into other provinces so that they could consolidate their businesses. ''The Chinese authorities are now trying to help them to consolidate, expand or diversify to make them into conglomerates,'' said Mr Yan. Consultation with various ministries and provincial governments was taking place to ensure smooth implementation of the plans. Nick Ni, China economist at Nomura Research Institute, said it was inevitable that Chinese enterprises targeted for transformation should be allowed to break into other provinces. ''This would allow those which are better run and are financially stronger to absorb weaker and inefficient firms in similar businesses in other provinces,'' he said. But both Mr Yan and Mr Ni said the clear separation of ownership from management would be the key to the successful setting up of the conglomerates. The plans to form the conglomerates are part of an overall strategy to reform the state enterprises. This was one of the themes of the Third Plenum of the Communist Party's Central Committee, which ended last month. The strategy for reforming the state sector was embodied in a new slogan - the ''10,000-1,000-100-10 project'' - reportedly coined by SETC minister Wang Zhongyu. Under this project, 10,000 of the 13,000 large and medium-sized state enterprises would be rejuvenated by the year 2000. Their success would be measured by productivity improvements, profit growth and international competitiveness. From the 10,000, one hundred would be chosen to undergo corporate restructuring. Final candidates would be recommended by the municipal and provincial governments, the ministries and even the State Council. Various corporate structures are being considered for these 100 enterprises. Some may be listed at home or abroad; others may become holding companies, limited corporations or even joint stock companies. A further 1,000 companies would be chosen from the 10,000 to test how the concept of ''supervisory boards'' would work out. Under this concept, a board of directors different from the managers would be set up, to allow independent directors to monitor the enterprises without intervening in the day-to-day operations. It is understood that the German system, under which the owners and board directors are generally independent of each other, is being considered for this scheme. Another aspect of the strategy refers to the 100 companies that would be singled out for the pilot project for the Japanese sogososha scheme. The last aspect is to identify 10 cities targeted for comprehensive reforms of the state sector. These cities have yet to be chosen. ''The strategy is ambitious as it is not easy to find management talent in China at the moment. They have very bright people but, unfortunately, many lack the international exposure needed to do the job,'' said Mr Yan.