Insiders close to the policy-makers revealed that the government reforms will establish a State property management commission to deal with State-owned enterprises (SOEs) worth more than 10 trillion yuan (US$1.2 trillion).

Though its name and the details of its role have not been finally determined, the new agency will likely be authorized to perform functions of several different ministries.

The Central Economic Working Conference, which closed last Tuesday, has identified State-owned asset management reform and government organization restructuring as two of the four major reforms scheduled next year. The other two are financial reform and rural fee-to-tax reform.

Hu Angang, chief researcher with the 21st Century Academy of Development and Research at Tsinghua University, said that compared with previous administrative reform, the government restructuring is expected to substantially adjust the functions of ministries and commissions. Hu's academy is a major think-tank of the central government.

Other sources said that along with the establishment of the new State property management commission, the power of several ministries, such as the Ministry of Railways and the State Administration of Civil Aviation, might be reduced.

Their ownership relationship with enterprises will be cut off.

The expected reform echoes the speech of Jiang Zemin, former general secretary of the Communist Party of China (CPC), at its 16th National Congress.

Jiang said that the State should establish a State property management system under which the central government and local governments enjoy owner's equity. The system, combining rights with obligations and duties, should administer assets, personnel and other affairs.

The new State property management commission won't come from thin air. The State Development Planning Commission (SDPC) and the State Economic and Trade Commission (SETC) are very likely to become the foundation of the new commission, according to insiders.

The SDPC is the major policy-making organ, while the SETC has been a manager of SOEs. Nine former industry ministries, such as the former Ministry of Chemical Industry and the former Ministry of Metallurgical Industry, became the root departments of the SETC in past reforms.

So far it is unclear whether SDPC or SETC will become the major contributing body of the new State property management commission. Analysts believe the SDPC might enjoy priority because Zeng Peiyan, minister of the SDPC, was promoted to the Political Bureau of the CPC at the recent Party congress.

If the SDPC plays a major role in forming the new State property management commission, its name and function will be changed. The word "planning" might be dropped because it could remind people of the planned economy.

But Chen Huai, a famous economist with the Development Research Centre of the State Council, said that the name does not mean the SDPC is still a body implementing planned economy policies.

"It represents the (idea that) government should make predictions on economic and social development," Chen told Business Weekly.

Chen said that the administrative reform is quite necessary to meet the situation created by China's entry into the World Trade Organization (WTO), market saturation, and especially to handle State-owned-asset management.

In the past 20 years, Chinese policy makers have launched several rounds of government reform aimed at improving government efficiency, activating SOEs, and reducing the number of redundant government employees.

In the early 1990s, the central government set up the Administration of State-owned Assets to oversee State-owned property management.

However, the administration was dismantled in 1997.

Chen Zhiwu, a professor of economics with Yale University, said that the key problem leading to the failure of the Administration of State-owned Assets was that it had not been given enough power.

In 1998, when Zhu Rongji was appointed as Premier of the State Council, policy makers made a bold move to reshuffle government organizations. More than 20 ministries were reduced or eliminated and the number of central and provincial government employees was cut by 50 per cent.

But further reforms might be easier said than done.

Xue Lan, deputy dean of the School of Public Policy and Management, said like previous efforts, the reforms might meet strong resistance from those whose interests are being impinged.

Meanwhile, to reduce ministries' ownership rights in SOEs might simultaneously lead to the development of new government departments, such as various regulatory commissions.

"The powers of these regulatory commissions might challenge the efforts to establish a new State property management commission," Chen of Yale said.

Policymakers should also be careful to avoid allowing the new State property management commission to excessively expand its powers, Chen said.

The best solution is to place the new commission under close supervision of the NPC's standing committee and the public, Chen suggested.

(Business Weekly December 24, 2002)