Employees of state-owned enterprises have been barred from holding stakes in parts of their own companies, under rules issued by China's state-owned assets regulator yesterday.

Employees holding middle-management positions or above must sell their holdings or resign within a year of the rules becoming effective.

Before the sale of the stake is completed, the employees cannot increase their investments in the units, and those who are promoted to middle-management level must sell their stakes within six months.

"The new rules are aimed at regulating the restructuring of state-owned enterprises, strengthening corporate management, preventing losses of state-owned assets and protecting rights and interests of companies and employees," the State-owned Assets Supervision and Administration Commission said yesterday on its Website.

Analysts said the new rules will protect state assets from being encroached by staff and are favorable to the long-term development of SOEs.

Many employees have invested in their companies in recent years to participate in the revamping of SOEs. This has played an important role in promoting reform and enhancing the competitiveness of the companies.

But a lack of uniform standards and irregular practices resulted in several problems during the process, the commission said.

Employees of medium and small SOEs are encouraged to invest in their companies' reform programs, but they can't hold stakes in subsidiaries or other companies that their company has business dealings with, it said.

Those in middle management or above who hold another job in a non-SOE must resign from the other job within six months.

Staff involved in scientific research, design and high technology can apply to the state-owned assets regulator if they need to hold stakes in subsidiaries under some special conditions.

SOEs cannot lend state assets to employees for employees to reinvest in SOEs, and companies which have business dealings with SOEs are similarly barred from lending money to them for investments.

(Shanghai Daily October 9, 2008)