China is thinking of establishing State-owned asset management companies (AMCs) to manage its 15-trillion yuan worth of State-owned assets, a top official said yesterday.

Li Rongrong, director of State-owned Assets Supervision and Administration Commission (SASAC), said that the government has been considering a new mechanism to manage its State-owned assets better.

This mechanism will consist of three layers - the State-owned enterprises (SOEs), asset management companies, and the supervisor of those assets.

SASAC, which now functions as both manager and supervisor of the SOEs, will be transformed into a purely supervisory body, Li said in an online interview with Xinhua News Agency.

But Li did not chart out a specific timetable for the reform. He said that more laws and regulations would have to be put in place to build the new mechanism.

The SASAC has been running asset management companies on a pilot basis since 2005, Li said.

The State Development and Investment Corporation (SDIC) and China Chengtong Group were two firms at the central government level that have been managing part of the State-owned assets.

The country also has some asset management firms at the local government level, he said.

By April this year, SDIC had developed a range of investment portfolios with total assets under management worth some 1.8 trillion yuan, Wang Huisheng, president of SDIC told China Daily in an earlier interview.

These included coalmines, electric power stations, ports, chemical fertilizer manufacturers, fund and asset management companies, and finance houses across China.

The Chinese State-owned investment giant netted a staggering 42.1 billion yuan in operational sales revenue last year. This was a 41 percent year-on-year growth.

Net profits soared to 5 billion yuan - a 30 percent increase over the 2007 number, according to Wang.

SDIC has said that its next move would be to invest overseas.

Li however warned yesterday that not all SOEs were qualified to shop abroad for mergers and acquisitions (M&As).

The SASAC director called on SOEs to focus on improving their corporate governance structure in order to run State-owned assets more efficiently and safely.

"Only by increasing corporate governance can they have more opportunity to make a successful M&A," said Li. "Establishing a standard board of directors will help to increase the success of a merger deal."

(China Daily June 30, 2009)