China will issue a detailed regulation on management buyouts (MBO) in small and medium-sized State-owned enterprises (SOEs) in next two weeks when the annual meeting of China's legislature is held, a senior official said.

Li Rongrong, minister of the State-owned Assets Supervision and Administration Commission (SASAC) under the State Council, said that the regulation will have detailed standards and procedures to the guidelines and provisions on reform for the SOEs issued by the SASAC and the Ministry of Finance.

Li said that the MBO in small and medium-sized SOEs must take place under the strict supervision of local State assets management agencies and according to a clearly-defined equity rights scheme.

The regulation will strengthen the supervision on the managers operating the SOEs and will add some detailed clauses to keep managers from cheating during the MBO.

The SASAC issued a guideline last year to crack down on irregularities or malpractice in the restructuring of State-owned enterprises (SOEs).

The document specifies that some irregularities have taken place in a number of SOE restructuring projects and have resulted in a loss of State-owned property. Policies have been put forward to regulate the approval of an SOE restructuring scheme, checks of company assets, audits, asset evaluations, property trade, pricing and payment in the guideline.

(People's Daily March 5, 2005)