Ailing firms need new ideas

Chris Yeung

CHINA'S leading newspaper has called on ailing state firms to seek new ideas to lift them out of the doldrums.

Admitting that the total losses of state firms were expanding, the People's Daily said in an editorial yesterday that boosting economic efficiency of the state sector was vital to ensuring the ''sustained, fast-speed and healthy development of the economy''.

Despite the decade-long campaign to raise economic efficiency, the newspaper said the efficiency of enterprises, particularly those owned by the state, was still ''not ideal''.

''The proportion of input to output is not high in many aspects and the profit rate, labour productivity and index of consumption of raw materials are lower than they should be.

''The total losses of state-owned enterprises are increasing.

''So raising economic efficiency has become a must if China is to keep its economy developing in a sustained, rapid and healthy way,'' the editorial said.

Latest official statistics have shown that nearly half of China's medium to large state firms are in the red.

Total losses last year were about 30 billion yuan (HK$26.6 billion), up more than 20 per cent from the previous year.

The editorial said inefficiency was being worsened by the country's economic structure.

It cited the low growth in farmers' incomes, which restricted the development of rural markets and the sale of industrial products.

It said the problem of excessive investments could not be solved because enterprises did not bear the responsibility of improving economic efficiency.

The stock-piling of industrial products had made it more difficult for enterprises to raise their efficiency. At the same time, transport and communications bottlenecks had severely restricted the movement of raw materials and finished products.

The direct cause of low efficiency, it said, was the inability of firms to reform their management, technology and quality of their products.

In order to raise economic efficiency, it was essential to upgrade equipment as well as strengthening scientific and technological research and improving management policy, the editorial said.

It said it was fundamental that enterprises become fully integrated with the market.

''The basic way to raise economic efficiency is to guide enterprises into the market so that they play the leading role in market competition,'' it said.

The rules of the ''survival of the fittest'' would help rejuvenate the ailing sector, the People's Daily said.

More enterprises were becoming aware of the significance of understanding the ''macro'' and ''micro'' aspects of the economy in pursuit of efficiency.

The paper said these firms had studied the market situation and its growth trends.

''They do not see the macro-control of the state as a negative factor of restraint, but an important guidance of their activities.

''By doing so, they will be able to attain better and more stable economic efficiency,'' the editorial said.