Devaluation of state assets has become a serious problem in China's organization of its state companies. China should improve its property right trading market to prevent the loss, said a senior Chinese official.

China has nearly 90,000 state companies and state assets of about 10 trillion yuan (US$1.2 trillion), of which at least 300-400 million yuan (US$36.2-48.3 million) need to be reorganized. Government statistics show state assets traded through special property right trading institutions are sold for 10 percent more than others.

China should therefore develop a sound and effective market to provide a platform for property right trading in the transformation of state companies, said Li Baomin with the State-owned Assets Supervision and Administration Commission (SASAC).

An investigation by SASAC showed revealed that while Taiyuan, a city in north China's Shanxi Province, has five property right trading institutions, few state companies enter these institutions for trading.

Even when state assets are traded in these institutions, they usually do not go for public bidding, which might cause devaluation of state assets, said Li.

Investigations have shown that after open biding, state assets are usually sold at a price 20 percent higher than the estimated price.

A big problem with China's property right trading is that the country has no concerned management institutions and laws, said Li.

China has more than 200 property right trading institutions, but last year, only 58 of them reported trade volume of more than 100 million yuan (US$12 million), 85.5 percent of which are from ten big trading institutions, including two in Beijing and Shanghai.

"This year, the ratio of property right in the market has increased to 85 percent, but in some areas, the ratio is lower than 35 percent," said Li Yizhong, leading official with the SASAC.

Local governments play an important role in improving property right trading, said Li Baomin. In the first nine months this year, the trade volume in three property right trading institutions in Beijing, Tianjin and Shanghai has seen obvious growth due to the local government support.

(Xinhua News Agency December 23, 2004)