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China plans shake-up for state enterprises
( 2003-11-12 08:52) (China Daily)

State control of the economic sector will gradually weaken amid a trend of mergers and acquisitions with non-State and foreign investors.

Li Rongrong, minister of the State-owned Assets Supervision and Administration Commission (SASAC ), said this at a press conference in Beijing Tuesday.

From April to September, the central State assets supervisory body approved the property right and asset transfers of 48 State-owned enterprises (SOEs), involving 22.5 billion yuan (US$2.7 billion).

Among the transfers of large SOEs directly supervised by the central government, as much as 83 per cent of the assets were transferred to domestic private firms and foreign investors.

While the government encourages such transfers, the move should be initiated by the enterprises themselves according to market rules, said Li.

The purpose of the growing push towards mergers and acquisitions is to better allocate resources and improve profitability. The prices of the transferred State assets should be decided by the market, he noted.

However, Li said irregularities do exist, such as selling State assets at much lower prices in behind-the-scene transfers.

The role of SASAC is to design more standards and rules to ensure transparency, fairness and equity in the transactions, Li said.

So far, the commission has proposed regulations on equity transfers of non-listed firms.

This year the SASAC has been working on 13 administrative regulations, which cover authorized management of State-owned assets, property-right disputes and evaluation of corporate performance, said Huang Shuhe, a SASAC vice-minister.

The long-expected rules on management buyouts are being studied.

Another 15 regulations will be drafted in the coming year, said Huang.

Li noted that circulation of State-owned shares and reductions in the ratio of such shares are two different concepts.

The reduction in ratio of non-tradable State shares in the listed firms has been an issue causing headaches for market supervisors in recent years.

Investors fear that a sell-off of such shares would water down the value of shares by dramatically increasing liquidity in the market.

The Chinese authorities are still trying to find feasible ways of circulating State shares in listed companies, but no timetable has been set, Li said.

Regardless of what form it takes, the endeavour will give fair treatment to all investors and grant them sufficient protection, said Li.

SASAC will hold an international forum on mergers and acquisitions in Beijing next Wednesday and Thursday.

The mergers and acquisitions market in China still has a high potential for growth. So far, that market only accounts for about 5 per cent of foreign investment in the country.

A sound legal framework will speed up the process, experts said.

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