Once a heavily-burdened enterprise, the Changchun-based
First Automotive
Works Group (FAW) recently merged with the Japanese joint
venture Toyota, re-establishing itself as a giant Chinese
corporation.
The joining completes the biggest merger in China's automobile
history and provides an example of how many struggling state-owned
enterprises are being reborn after economic reforms.
"FAW just spent four years to accomplish what takes some
multinational auto companies decades," said Liu Shijin, an expert
with the China Development Research Center of the State
Council.
In
1998, FAW, despite being the producer of China's first auto car,
was thrown into a lurch when the number of its redundant staff
topped 100,000 and its profits dropped in successive years.
New life has been given to FAW after four years of knuckle-down
reforms, reducing 80 percent of its staff and boosting profits six
fold by 2001.
The auto company's story is a vivid illustration of the changes and
unprecedented obstacles faced by many state-owned-enterprises in
China as the country transforms from a planned to a market
economy.
In
1997, many of China's large and medium-sized SOEs reported
deficits. At the end of the year, the Chinese government set a goal
for these enterprises to climb out of poverty and establish a
modern corporate system within three years. By the end of 2000, 70
percent of China's large and medium-sized SOEs had built up a
corporate system, and the proportion has topped 85 percent among
those ranked as national key enterprises.
The International Monetary Fund (IMF) released a report at the
beginning of this month, giving its approval of the SOE reform
initiated by China, and saying that success in this sector will
help promote a sustained development in other industries, as well
as in the finance sector.
Over the past few years, the Chinese government scrapped all
industrial departments in charge of SOEs, leaving market
competition to decide their fate. It waged a three-year campaign to
help 13 of the 14 key industries to reverse losses and begin to
make profits. Other undergoing reforms are designed to modernize
the corporate system and strengthen corporate governance.
President of the World Bank Group James D. Wolfensohn praised the
tenacity and resolution of China's leaders in pushing forward the
SOEs reform, though the process is full of difficulties.
Lu
Zheng, director of the Institute of Industrial Economics under the
Chinese Academy of Social Sciences, said the SOE reform is like
building a skyscraper from scratch. Over the past two years, the
emergence of asset management companies and debt-for-stake swaps
helped the SOEs cut their debt-asset ratio to below 50 percent.
Experiments with the corporate governance mechanism also succeeded
and spilled over into wider areas.
As
international competition intensifies with China's joining the
World Trade Organization (WTO), SOEs have accelerated the process
of forming large conglomerates with international competitiveness.
The Qingdao Haier Group
Co. boosted its overseas operation revenue to 60 billion yuan
(US$7.3 billion) in 2001, 48.3 percent more than in the previous
year.
Despite such setbacks as unemployment, Chinese leaders never
hesitated to push forward the reform. Chinese President Jiang Zemin
toured the country and met with local officials and enterprise
executives in 1999, urging them to reach the goal of reversing most
of the money-losing SOEs within three years.
Now the SOEs have become the mainstay of the economy, accounting
for half of the country's industrial output. Though the total
number of the SOEs drops, their total assets have swelled to more
than 16 trillion yuan (US$2 trillion), mostly located in the
infrastructure and key industrial sectors such as oil, transport
and telecommunications.
(Xinhua News
Agency September 13, 2002)