China will increase the pace of institutional reform of the biggest state-owned enterprises (SOEs) via the establishment of boards of directors and recruitment of more senior executives.

Li Yizhong, deputy minister of the State-owned Assets Supervision and Administration Commission (SASAC), said Wednesday at a working conference that the central SOEs should modernize their systems, enhance corporate governance and upgrade their human resources management.

The SASAC acts on behalf of the State as the investor in the 191 central SOEs, which are the leading enterprises in their industries. The SASAC has been actively promoting the reform of these SOEs since its establishment last April.

Some of the central SOEs will introduce boards of directors and recruit more senior managerial staff through open competition this year, said Li. Other SOEs will follow at a later stage.

"The next three years will be the crucial period of the reform to build a new state-owned assets management system and modern enterprise system," he said.

"We have to build some big enterprise groups that are really internationally competitive."

The managers of the SOEs will shoulder more liability for the performance of the enterprises and receive payment accordingly. Meanwhile, more incentives will also be given to good performers.

"We will encourage more competition in the applications (for) managerial positions in these enterprises," said Li.

In the future, all the subsidiaries of the central SOEs will recruit their executives through open competition. Foreigners will also have more opportunities to work in these big SOEs.

A global recruitment campaign was held last year to find seven senior managerial staff for six central SOEs. The SASAC will soon kick off a similar campaign to fill 23 senior positions, such as deputy general manager, in 22 central SOEs. The details are to be announced soon.

Li said that as authorities encouraged innovation in the SOEs, they would also take firm measures to punish law-breakers, such as those caught embezzling State assets.

By the end of 2003, the 191 central SOEs had total assets of 8.32 trillion yuan (US$1 trillion), according to SASAC statistics.

They realized profits of 300.6 billion yuan (US$363. billion) last year, up 25 percent year-on-year.

(China Daily June 24, 2004)