Principles were established that owners' rights are divided among central and local governments, while State asset management functions are taken over from various ministries by specialized entities to be set up.

Analysts widely expect acceleration in State-owned enterprise reform and more power with local government.

But "there remain many unsolved issues in theoretical and operational aspects," said Chen Qingtai, deputy director of the Development Research Center (DRC) of the State Council, China's cabinet.

"Inappropriate handling of whatever key issue, in any aspect, may lead to extremely serious problems," Chen told a high-profile seminar yesterday which brought together government officials and scholars from both home and abroad.

The complicated reform not only determines the efficient use and protection of China's enormous 10 trillion yuan (US$1.2 trillion) worth of State assets, but is closely linked to ongoing reforms, like the withdrawal of State ownership from non-strategic sectors.

Yesterday's discussions centered on key issues such as how ownership rights are divided among central and local governments, the responsibilities of the proposed entities overseeing State assets and their role in company operations, as well as the structural possibilities of the State asset management system.

Zhang Wenkui, deputy director of the DRC's Enterprise Research Institute, urged for a clear-cut ownership rights division among central and local governments.

He said the central government should retain the right to circumscribe the scope of State assets, draft rules and procedures in the sale of State shares in listed companies, determine the use of proceeds from the sales and formulate budgetary procedures for companies managing State assets.

Zhang said the State asset management entities should take over most operational businesses, as well as the assets of administrative entities after their commercialization, but not natural resources.

Zhou Fangsheng, a senior researcher with the Fiscal Science Institute of the Ministry of Finance, recommended not including financial industries in the State asset management entities' responsibilities for an easier start.

Zhang cautioned against the possibility of the asset management entities obtaining too much power, which may threaten corporate governance of companies, and instead recommended the straight guidance of Company Law, rather than new rules, as well as the establishment of boards of directors at even solely State-owned companies.

Tong Daochi, deputy director of the Listed Companies Department under the China Securities Regulatory Commission, endorsed the reform as a key measure for solving the effective absence of the State as a shareholder in China's listed companies, 75 per cent of which are controlled by the State.

An estimated 80 billion yuan (US$9.6 billion) of listed companies' capital has been illicitly hogged by their parent companies, Tong said.

(China Daily January 15, 2003)