Li Rongrong, director of the State-owned Assets Supervision and
Administration Commission (SASAC), said
the regulation on management buyouts (MBOs) of state-owned
enterprises (SOEs) is currently being consulted on and will be
published soon.
Speaking on a CCTV program on February 2, he reiterated his
opposition to MBOs, saying that it was currently inappropriate to
adopt them as a general approach. "Many state assets are priced and
bought by the same executives," he pointed out.
The issue has been under the spotlight since Larry Lang, a
professor at the Chinese
University of Hong Kong, published reports saying that many
executives of large SOEs encroached on state assets and that MBOs
were bad for China's reforms.
The SASAC later ordered for all MBOs to stop whilst they were
debated.
Senior executives of SOEs directly supervised by the SASAC
attended a meeting on December 14, which agreed that MBOs should be
regulated.
Small and medium-sized SOEs would be able to progress with MBOs,
on condition that they guarantee capital providers, equity and
responsibility, whilst large SOEs would not be allowed to go ahead
with them.
According to Li, the draft regulation will encourage and
standardize the state equity trade. The SASAC has appointed three
equity exchanges in Shanghai, Beijing and Tianjin as centers for
state assets trading.
The primary measure to prevent state assets loss is to ascertain
the responsibilities of executives, he said.
In November, the commission signed operation contracts with
senior executives of 187 SOEs. They regulate four areas of
achievement appraisal, including profit and net return of assets.
Those who don't fulfill their targets will be punished by being
sacked or losing wages.
Li said the most urgent things for 2005 are to accelerate
establishment of boards of directors in all state-invested
companies, to continue checking and auditing state assets, and to
adjust the structure of SOEs.
He reaffirmed that SOEs will be sold or merged if they don't
make it into the top three of their respective sectors.
The SASAC, a special branch of the State Council, was
established in March 2003 to oversee state assets. It now directly
controls 187 central government-invested companies and 9.2 trillion
yuan (US$1.11 trillion) in state assets.
(China.org.cn by Tang Fuchun, February 7, 2005)