The eagerly anticipated draft law on State assets was submitted to the national legislature for the first reading Sunday.
Lawmakers at the 31st session of the 10th National People's Congress (NPC) Standing Committee, which runs until Saturday, are reviewing a draft of 14-year-old legislation in order to clearly define which departments and ministries can invest in State firms.
China's reform of State-owned enterprises has made much headway, said Shi Guangsheng, vice-chairman of the Financial and Economic Committee of the NPC, but "quite serious" abuses and losses of State-owned assets have aroused deep concerns among the public.
China now boasts a colossal 29-trillion yuan ($3.94 trillion) worth of State assets, excluding financial enterprises, while net assets stand at 12.2 trillion yuan ($1.66 trillion).
"It is necessary to draft such a law to manage such vast State assets," said Zhang Xiaowen, economist from the economic system and management institute of the National Development and Reform Commission.
The draft law will not govern all types of State assets, just operational assets, as in contrast to resource assets like land, forest and assets owned by public institutions and government agencies not for business purposes.
Management methods of the three types of assets vary, making it hard to use a single law to accommodate them, the NPC's Shi told lawmakers.
Those government departments that can invest in state firms include the State-owned assets supervision and administration agency under the State Council (SASAC), local agencies and other departments the government has authorized to manage State assets, such as the Ministry of Finance.
"The role of SASAC has been in the spotlight during the law-making process," said Li Shuguang, a senior law professor with the China University of Politics and Law.
SASAC, which represents the State in 152 major State enterprises, has played a dual and often dueling role as both supervisor and investor, he said.
The draft law has, in reality, defined it as a pure investor, although it has not explicitly spelled it out, Li said.
It has shifted the role of supervision to the people's congress at all levels - the State Council and local governments, the auditing departments and the public.
Apart from those 152 firms managed by the SASAC, China's State assets also include financial enterprises, a large number of local State companies and more than 5,000 enterprises managed by central ministries, Li said.
"Their management should also be independently and effectively supervised," he said before suggesting a special State asset supervision bureau be set up under the Ministry of Supervision to play that role.