State-owned enterprises (SOEs) directly affiliated to the central Chinese government have been asked to concentrate on their core business and allocate no more than 10 percent of their total investment to areas outside key activities.

The State-owned Assets Supervision and Administration Commission (SASAC), which supervises 166 SOEs on behalf of the central government, will regulate their investment activities, putting a 10-percent cap on investments outside their core business.

Self-financing should account for more than 30 percent of total SOE investment, according to the regulation.

SOEs should register their investment activities, such as fixed-assets investments, mergers, acquisitions and long-term equity investments, with SASAC, the regulation said.

The regulation prohibits SOEs from expanding investment beyond their financial capabilities, instructing them to keep their asset liability ratio at a reasonable level.

SASAC officials will speak to those who violate rules and may even veto their investment plans.

In China, self-financing often accounts for only 10 to 20 percent of many large SOEs' investment, but in western countries this ratio stands at 60 percent, said Liu Cheng, a professor with the Beijing Science and Technology University.

(Xinhua News Agency August 16, 2006)